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« Caught By Mistake In Web Of Foreclosure | Main | Why the World Is Financially Doomed in 4 Charts »

Robo-Signing Is Child's Play Compared To This - Bank of America Allegedly LYING To State & Federal Courts About Fraudulent Foreclosures in Kentucky

Illustration by Steve Brodner

Guest post from Yves Smith of Naked Capitalism.  Legal docs included inside.


Scroll down for embedded legal document


If you were to believe the banks, the concern over foreclosure “improprieties” is way overdone. They claim that the robo signers really weren’t doing anything seriously wrong, the banks just need to redo some paperwork, and everything else about foreclosures is just fine.

Yet Bank of America, having made the implausible claim that it had reviewed 102,000 cases in a few weeks and nothing was amiss, was forced to retreat and acknowledge that it’s review hadn’t been comprehensive, and it was finding errors at a rate that could exceed 5%.

The bank position so far has been that problems so far are mere mistakes and “sloppiness”. But as we’ve described repeatedly, the problems with securitzations run much deeper than that. It appears that the parties to the deal often failed to take the time consuming steps necessary to convey the note (the borrower IOU) to the trust as stipulated in the contract governing the deal, the pooling and servicing agreement. The PSA required that each note in the deal had to be signed by multiple intermediary parties before it got to its supposed final resting place, a trust. And that had to take place by closing or at most 90 days thereafter.

Many foreclosures show this process was not observed on a widespread basis: the notes were assigned (as in transferred) to the trust right before closing, a violation of the PSA, the New York trust statutes that govern virtually all mortgage securitization trusts, and IRS rules for these trusts (REMIC). When foreclosure defense attorneys started contesting these assignments, suddenly a new ruse started to show up: allonges, which are sheets of paper that contained the needed endorsements, would magically appear out of nowhere. The problem is that an allonge is supposed to be used only when there is no space left on the note for endorsements, including margins and the reverse side, and when it is used, it is supposed to be so firmly attached to the original as to be inseparable. But these “ta da” allonges were always somehow discovered at the custodian, quite separate from the note.

Bank of America appears to have improved the state of the art in the creative foreclosure procedures department. I started hearing a few months ago about a sudden and suspicious increase in the number of foreclosures Bank of America was making in its own name. BofA was in effect saying that it owned these loans and had never securitized them. That seemed questionable, since the bulk of Bank of America’s mortgages had been originated by Countrywide, and Countrywide has said in its SEC filings that it securitized 96% of them. Why would the courts see such an explosion in foreclosures in the relatively small proportion of mortgage that BofA had kept on its books? Lawyers suspected that BofA was falsely claiming that it owned the loan to circumvent questions about standing (if the note had not been conveyed to the trust properly, then the trust might not be able to foreclose).

We now have some evidence that these suspicions are correct. A bankruptcy attorney in Kentucky has been working with clients who have lost their homes in foreclosures in the name of Bank of America. After taking the house, the bank has been filing deficiency judgments for the remaining mortgage balance. The attorney files a Chapter 13 bankruptcy. In the example we have here, Bank of America next files an objection to the bankruptcy plan. The attorney for Bank of America makes a response to the objection. Before the confirmation hearing, the same attorney files a second objection to the plan in the name of a Countrywide trust.

The attorney for the borrower, needless to say, raises all kinds of hell in the hearing, and wants an explanation of how two creditors, each representing the same debt obligation, can each object to the plan, when neither has yet filed a Proof of Claim.

Here is the juicy part.  A Proof of Claim is filed later that day. It shows a series of assignments that were executed after the judgment (meaning after the house was taken by BofA) and after the borrower’s attorney filed the bankruptcy petition. The assignment is from MERS to Bank of America executed on September 29. The second assignment is from Bank of America to trust CWABS 2003-B6. This assignment has not been recorded in the land office as of November 10. And even more fun, the allonges look odd.

SEC filings show the loan as asset of CWABS 2003-BC6.

So we have:

1. Either Countrywide lied in its 2003 SEC filings or the loan was never on Bank of America’s books. Which would you believe?

2. Even though Countrywide appears to have intended to convey the loan to its CWABS 2003-BC6 trust, it appears never to have completed the steps. The assignments are legally void by virtue of being out of time and by being inconsistent with conveyance chain stipulated in the PSA (which would have been from Countrywide through at least one intermediary entity to the trust. So the trust does not now own the note either.

This means the odds are awfully high that Bank of America committed multiple frauds on the court, first on the state court in the foreclosures process, and now on the Federal bankruptcy court.

This sort of abuse is far more serious than robo signing.  As much as the likely misconduct here and robo signing would both be considered frauds on the court, the robo signing is arguably cost cutting gone mad and riding roughshod over proper legal procedures.  By contrast, this practice has all the appearances of multiple coverups of the fact that Countrywide trust did not have standing to foreclose on the house.  The steps undertaken here look to be a deliberate, concerted effort for the bank to get its way, the law be damned.  And this clearly took more parties and more thought than the robo signing abuses.

At a minimum, the attorneys at the law firm and the parties at the servicer had to be aware of this device.  And if our reading of this document is correct, this is fraud, pure and simple.  It’s high time we see some attorneys disbarred and some law firms go out of business as a result of foreclosure chicanery, as well as serious investigations of the people involved in foreclosure litigation at the servicers and the banks’ general counsel’s office.



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Reader Comments (21)

screw these banks we should have never bailed them out.

the feds should have bailed out the people instead.
Nov 11, 2010 at 3:09 PM | Unregistered CommenterSell Short
or maybe not bailed out anyone...;-)...but definitely NOT the banks...
Nov 11, 2010 at 3:22 PM | Registered CommenterDailyBail
This is a riot...stop groping me...


A message to the TSA...
Nov 11, 2010 at 3:23 PM | Registered CommenterDailyBail
It looks like Karl Denninger picked up this story...thanks Karl...

Nov 11, 2010 at 3:24 PM | Registered CommenterDailyBail
Make sure to read his post...there is some great commentary there...

Nov 11, 2010 at 3:25 PM | Registered CommenterDailyBail
Nov 11, 2010 at 3:27 PM | Registered CommenterDailyBail
Pastor Indicted on 1st Degree Murder Charge

Nov 11, 2010 at 3:28 PM | Registered CommenterDailyBail
Vlad Drac would know how to deal with this: impalement.

At a minimum, heads on stakes.
Nov 11, 2010 at 3:53 PM | Unregistered Commentermary clyde
At this point it's hard to be surprised anymore.
Nov 11, 2010 at 4:06 PM | Unregistered CommenterTom
Mary, at one of the California tax protests a while back, the crowd was chanting "Heads on sticks! Heads on sticks!"
Nov 11, 2010 at 4:39 PM | Registered CommenterDr. Pitchfork
Gosh, Dr. Pitchfork, that's most interesting. maybe we ARE heading for our "Romanian moment." (I'm thinking here Vlad Drac, not Ceausescu).

"Too late for impeachment....Time for impalement"

Hey, is that a new slogan, or what? ;- 0
Nov 11, 2010 at 6:11 PM | Unregistered Commentermary clyde
I would bet a hell of a lot of money those crooked bas**rds in Congress are cooking up some legislation to make fraud legal when banks commit it to take someones home away.

Why should Americans pay any attention to the law anymore?

Our government refuses to investigate, or prosecute a group of criminals who almost destroyed the American economy and did destroy the middle class livelihood. Instead of standing up for the people of this country and dealing with the criminals to the full extant of the rule of law. Our corrupt, decadent government used our taxes to bail them out with no oversight and is allowing them to continue the same actions that caused the collapse. Any legislation that could really protect the American taxpayer has been carefully de-fanged by the bankster Congress. Record bonuses for the crooks and out on the street for the unemployed homeowners and their families.

If the government refuses to enforce the law it may be time for the American people to buy arms and ammunition to protect themselves when anarchy rules. Or maybe to enforce the law when the government refuses to do so!
Nov 11, 2010 at 7:06 PM | Unregistered CommenterSagebrush
DB: Good to see you hanging with Yves. Good company. Keep it up. Well times with Matt Tiabi's article.

Conclusion: Good move for you.
Nov 11, 2010 at 9:38 PM | Unregistered CommenterAMRKO
"Heads on sticks! Heads on sticks!"

Was that the Run on the Banks. When they had to step in when people were around the block to pull their money out, before the goverment put a stop to it?

The American People, knew something they wernt soposed to know, or understand, Ha ? It would of Shut Down Everything. Like the "One Hour Melt Down"........google it...?
Nov 11, 2010 at 10:06 PM | Unregistered CommenterTexas Dar
F - - K -----"BOA"......all I got to say.....AB
Nov 11, 2010 at 11:52 PM | Unregistered CommenterAint Bullshittin'
hey AB...you don't need to censor yourself in comments...use any words you wish...
Nov 12, 2010 at 12:04 AM | Registered CommenterDailyBail
I have respect for America and still hold to some shred of dignity...my name was chosen in the passion of anger and regret it has a curse word in it. However, no curse words can aptly capture the angst that has solidly permeated the fabric of our GREAT Nation. There is a tidal wave coming for these b-stards and it is only growing in strength and furor. Even though it is under the surface, what sank the Titanic was only that small portion exposed to the naked eye. Dig deep into the repressed emotion and consciousness of the average American and you will find there is a PATRIOT in mourning. Those who wield the power and control our lives care noting for you as a citizen. People are slowly waking up to that fact. I pray we will by peaceful means dethrone the corrupt and captive leaders whom destroy our way of life on a daily basis. I suggest starving this beast as best one can by moving accounts to local banks and credit unions. It is the only way to ensure your money flows locally in your own community. GOD HELP AMERICA.......GOD BLESS those who fought and died so we may have this freedom to choose. Please remember our fallen, thank a vet, hug your kids, don't focus on what is negative, and remember YOUR choices matter. So, educate a neighbor, friend, co-worker, or passer by on these issues. There is a day coming where we can live in peace and prosperity but it will only come if we make better choices both personally and as a nation. "The debtor is subservient to the lender".....direct quote from GOD in the Bible. If you are not a follower of Christianity, it still applies as a solid common sense principal to live by..........Don't be a DEBTOR....AB
Nov 12, 2010 at 9:10 AM | Unregistered CommenterAint Bullshittin'
I wonder where we would be today if the run on the banks back in 2008 would of followed threw. Why shouldent we just pull all of our money out now....? We get nothing for it. Just start an internet roumor, Hey, Jo Blow is pulling all his money out of his bank, Are You Going to Join Him.....? I am, screw the banks. Im keeping my money at home.

We could go back to paying with Cash.....Only, we have no money to pull out. But pleanty do. Im sure our local CU could use the buissnes.
Nov 12, 2010 at 4:51 PM | Unregistered CommenterTexas Dar
When they say they were "finding errors at a rate that could exceed 5%," they want us to think that they checked (let's say) 100 cases -- and 5 of those had a problem. But it could just as well mean: They checked the first 5% of the total number -- and all the ones they checked had a problem. To me this seems very possible, because, in the nature of this type of transaction, there's actually no way to do this type of transaction NON-fraudulently. Doesn't evey one of these "bundled securities" mortgages have a problem?
Jan 7, 2011 at 6:03 PM | Unregistered CommenterDuane
Someone made the comment that they weren't surprised. What a shame. You should be surprised, angry and vengeful.

We can no longer get justice from the US JustUs system. Its time we take matters into our own hands. It will not be fair for those being accused, but it is necessary.
Jan 8, 2011 at 2:37 AM | Unregistered Commenterdogismyth
I have a visit to your site. Nice site.Thanks for sharing your views with us.
Apr 4, 2019 at 1:20 AM | Unregistered Commenterafela123

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