Robosigning 2.0: Mortgage Foreclosure File Reviewers

Do you have what it takes to be a Mortgage Foreclosure File Reviewer Level 2?  An intrepid researcher forwarded to me a job ad for a mortgage foreclosure reviewer who will be reviewing bank foreclosures per the OCC/Fed servicing fraud consent orders. I have seldom seen a document that says more about the bullshit malarkey that the OCC and Fed are trying to pass off to cover for the banks than this job ad. I think it demolishes even the thin fiction that the OCC/Fed servicing consent orders are anything more than Potemkin villages. Instead, what we have here is nothing less than a federally-blessed Robosigning 2.0.

The ad is for a Mortgage Foreclosure File Reviewer Level 2 (whatever Level 2 means).  It states that the:

Key responsibility will be to determine if there was financial harm to the borrower. 

It further states that the MFFR-L2 will:

Conduct a complete review of the foreclosure file to ensure all default timeframes were processed accurately.

Review to determine if ownership of the note and mortgage was properly documented when foreclosure was initiated, and document any exceptions.

Determine if the foreclosure was processed in accordance with applicable state and federal laws, to include SCRA and US Bankruptcy Codes, and document any exceptions.

Validate fees and penalties charged and assessed were reasonable, customary and within the applicable state and federal laws, and document any exceptions.

Now I'm just a simple law professor, but gosh, these sure look like legal questions to me. A determination of whether there is financial harm (as in whether the harm is legally cognizable) is a question of law, not a question of fact--it would go to a judge, not a jury. The amount of the damages are a fact question, but that's a secondary inquiry after one determines that there was a legally cognizable harm. Similarly, proper documentation of the "ownership" of the note and mortgage is a legal question (and the legal terminology is not about "ownership" if the note is negotiable--itself a serious and unresolved legal issue).  And how about determining of the foreclosure was processed in accordance with applicable state and federal laws? That sure seems like something one would want a lawyer reviewing.  Same thing with the legality of fees and penalties. 

So given this job requires a determination of a whole number of legal questions, it's a job ad for a lawyer right?  

Nope. No law degree required, much less experience in legal issues relating to foreclosure (and appropriate conflicts screening). Instead, consider the "Minimum Requirements" for the position:

• Mortgage Servicing/Foreclosure experience (minimum of one year with Foreclosure experience)

Hmmm.  I did a year of robosigning after graduating high school.  Do I qualify?  Sure seems like it.  

• Audit experience (Ability to independently review foreclosure files) 

This is "audit experience"? For real? Not even Arthur Anderson would have made this sort of claim with Enron. This ain't an audit in the CPA sense of the word. Instead, I take the "ability to independently review foreclosure files" to mean that no one is going to double-check your work. Or put in legal terms, a second set of eyes via appellate review is more expensive than the OCC will make the banks shell for.  

• Pay rate is $19 - $23/hr DOE.  

That's a huge pay increase relative to a robosigner. Assuming 2000 hours a year, that's $38-$46k. Let's just say that in the DC suburbs, at least, this is only slightly more than a teenage babysitter makes hourly and is about equivalent to what a cleaning person makes hourly (and probably annually). This isn't what one pays to get someone with the relevant background for determining legal questions examining the files. At least it isn't being outsourced, like a lot of the foreclosure work itself. 

Bottom line here--it's hard to take the OCC/Fed consent orders seriously when all they mean is that a marginally more skilled employee is reviewing the robosigners' original work. And one can easily imagine an LPS red light/green light world in which they are incentivized to review more files faster and less carefully...

But this just brings us to a pair of perhaps more serious underlying problems. Even if the banks were paying for top grade legal talent (and it's a buyers market for legal services now), they can't determine that there was no financial harm done to the borrower--they simply lack the information to do so.

First, it's not clear that the banks have maintained files on their foreclosures dating back to 2009, when the consent orders run. Without the original files, there's really no good way to figure out if the homeowner was harmed financially. I'm not ready to assume that there's great record keeping on past foreclosures.  

Second, even if a lawyer looked at the bank's file, that's insufficient for determining if there has been harm. One would need to know something about the borrower's potential defenses before making such a determination.  

Consider this situation:  the homeowner was in default.  The servicer filed a foreclosure.  The homeowner filed for bankruptcy. Can either Legal Eagle or Robosigner 2.0 determine if there was financial harm? 

I don't think so.  Here are just some problems--going in a sequence in which there is real financial harm to the homeowner, but not in any way detectable from the bank's files: 

(1) Can the reviewer tell if any of the documents were robosigned? Not always. Some robosigning will be obvious. Others not. Does the servicer know with certainty what LPS or its network firms were doing and vice-versa? Doubtful.

(2) Can the reviewer tell if the assignment was backdated?  That was require determining the real date of the assignment. That would involve looking at the original note, determining when an allonge was created, looking at the PSA and making sure that there is an executed copy with original schedules that sufficiently describe the property in question. The precise requirements might vary from state to state. This ain't an easy task. And then we have to add in MERS, and how that might affect things. 

(3) Based on the backdated assignment, the servicer might have appeared to be a holder-in-due-course (HDC), and therefore impervious to "personal" defenses to the enforcement of the note, including fraud in the inducement.  Can the reviewer tell if the homeowner was harmed by a wrongful assertion or at least implication that the servicer was a HDC based on a backdated assignment?  Of course note. Whether or not there was direct financial damage depends on whether the homeowner could have raised a "personal" defense to the foreclosure, such as fraud in the inducement. Oh, does our foreclosure reviewer even know wtf a HDC is? Does the reviewer know if the note is negotiable or note (if not negotiable, then HDC is irrelevant, and so is possession of the note). 

(4) Does the foreclosure reviewer know why the homeowner filed for bankruptcy and what the financial harms are of that? Was the bankruptcy because of the foreclosure or for unrelated reasons? Trying to determine the financial harms here are difficult, not just because there's the question of harms from bankruptcy (pace TOUSA), but also because those harms may depend on the timing of the bankruptcy filing for the homeowner. To take a really obscure one, the timing of a bankruptcy filing may determine whether the homeowner is able to treat an extra year of (non-dischargeable) federal taxes as a priority expense and therefore maybe pay them off, rather than paying off debt that would otherwise be dischargeable. If you aren't following this twist, that's fine, but do you really think that the foreclosure reviewer level 2 is going to know, care, or be able to hash through this? 

Or how about this one:  homeowner was in default, the affidavit of indebtedness (AOI) was robosigned, but factually correct. The foreclosure sale resulted in a deficiency judgment. As a result of the robosigning, the foreclosure sale happened faster than would have occurred had things been done legally. The sale happened in a market that actually picked up post-sale. If the sale had been done later, there would have been a smaller deficiency judgment because the homeowner would have benefitted from the market uptick.

Financial harm? Yes. How much? Impossible to determine. Will it be considered? Not a chance. Welcome to Robosigning 2.0. 

[Update 10.9.11:  My source on this tells me that he has unconfirmed information that this is an ad for Bank of America's foreclosure review work.]

Comments

[PL]

Many trial judges can't figure this stuff out, throw up their hands and claim to await appellate review (knowing full well very few cases will make it that far.) But the OCC/Fed think a temporary employee with one year of "foreclosure experience" will be able to audit the file in a meaningful way? The consent orders cynically allow business as usual to resume, permitted by ineffectual foreclosure audits that whitewash past malfeasance.

[Daisy Anderson]

Welcome to my world!! This is a wonderful article and far above my paygrade. I'm just a lowly little realtor out here in Phoenix, AZ with immigrants that have bought homes in the 90's and now have been chased out of the country by our lovely Sheriff and Governor. Now the hardworking people that were paying taxes and their mortgages have lost their jobs because of the color of their skin. Even if they were all legally in the country, usually Grandma wasn't and now they have left because of the greed and racism our state has so plentifully bestowed upon them. Now our schools are empty, there are no workers left to do the jobs these families were happy to do and our tax coffers are empty. What a wonderful mess!

[dani]

all banks in the usa illegly stealing people homes
with paper work that are fraud.us courts&judges are helping banks steal people homes. they hand over homes to banks without any evidence that the banks even own the mortgage and promissory note.
only ny,nevada and ohio courts protecting homeowners the rest of the state are part of the fraud against the people

[Mike Dillon]

Wow, Professor. Thanks for taking the time to drill into this one. This is just absolutely disgusting. I dl'd and read the job posting before reading the rest of YOUR piece and, after reading the "job summary", immediately thought "legal background, accounting background, mortgage background." It may be "implied", but the ad doesn't explicitly say that they're even looking for high school graduates.

Unfortunately, as long as the feds keep rolling out "solutions" like this, there will be job security for those individuals actually trying to FIX this cluster. For awhile now, I've been of the firm belief that it's only going to happen on a case by case basis - which means borrowers are going to have to be willing to actually fight and have the means, motive and opportunity to do so.

Keep up the great work, Professor.

[McGruff]

Dismissed "with" prejudice.

Can any of you legal eagles tell me what options the lender has available IF their foreclosure lawsuit is dismissed "with" prejudice?

[Stupendous Man - Defender of Liberty, Foe of Tyranny]

William K. Black has said, in essence, that if we look for fraud we find it everywhere. So, for a long time there was no looking at all.

Now that enough people have become aware of the truth in that statement there has been a call for that look to occur.

At this point keeping the extent of the fraud covered up requires the look into the fraud is also fraudulent.

Fraud, on top of fraud, on top of fraud. There seems no end to it.

[Jan van Eck]

Further to the question posited by "McGruff," if a foreclosure suit filed by a "lender" is dismissed with prejudice, they have two options: (1) collect your payments, assuming you are willing to send them; (2) sell what they claim is their interest in the loan to a third-party buyer, and if the loan is already declared in "default," then that Buyer will not be a holder-in-due-course, but at best a "holder" IF the Note can be demonstrated to be transferred for value and by negotiation (more tricky legal concepts), AND the transaction is arm's length, and probably a few other factors. In short, they can try to sell it, probably to a vulture fund for pennies, and then you have to contend with that set of pond-scum all over again.

The third option, of course, is that you go to them and buy it yourself for pennies on the dollar. Start your Offer at about 6 cents and go from there.

[Robert]

I just wanted to say great article Adam. That's all.

[Anon]

Adam,

Stop Foreclosure Fraud added some information about Citi Group if any of your readers have them on their papers. They're hiring robots to sign affidavits for foreclosure hearings amongst other "legal" things.

http://stopforeclosurefraud.com/2011/10/09/robosigning-2-0-mortgage-foreclosure-file-reviewers/

[Jim Cossitt]

Isn't this just a continuation of the culture that the FCIC identified in it's 2nd major conclusion: "We conclude widespread failures in financial regulation and supervision proved devastating to the stability of the nation's financial markets."

The regulators are still falling down on their job and the superficial going through the motions to implement these consent decrees proves it. But it will give Max Baucus, Tom Harkin, Chuck Grassley and the rest of the herd that have been in DC way too long a chance to step up to the podium and say "We took action on behalf of the public".

Not quite the same reaction we got from WO Douglas in the 30's when he was setting up the SEC.

[Paul]

I have been illegally foreclosed on in Texas. I called an attorney in the Dallas area that specializes in this area of law and was told that they do not go after the fraud commited by the banksters because the economy is in the crapper. So, I increduously replied so fraud is permissible now because of the economy. They chuckled and said yes! Welcome to the REAL world.

[Mark D.]

Does a family becoming homeless, being forced to live in a room at a flea bag motel and as a group begging for money in a walmart parking lot constitute a "financial hardship"?

[Steven Rosenberg]

Over at Living Lies- my "story" was recently posted. It speaks for itself.
I encourage the blog community to look at the scribd document
where a Judge here in CA who "gets it" and sanctions Onewest Bank (a servicer) for not being a real party in interest. How will low level "auditors" have access to FDIC transfer information and moreover understand it?
________________________________________________
I have posted the following document on Scribd:

http://www.scribd.com/doc/67508709

(Onewest Bank Gets a Spanking)

Onewest Bank filed a motion to compel responses to Discovery against me.
Thanks to the Info on Neils site- I knew Onewest bank was not
a real party in interest. I refused to respond to their bogus discovery.
I had to educate my Probate Attorney as to the issues.
It helped that I obtained t a email FOIA response from the FDIC that indicated their sale of the assests of INDYMAC bank in March 2009 did not include the “loan” that has been under litigation now for 25 months.
Instead of OWB attorneys getting their requested $2,300 in sanctions against me, as the Personal Representative of My 88 year old dads Estate- THe Judge “got it” and sanction them for $750.
For the record- this California Judge relied on C.C.P 387(A) to based
his decision to sanction the Onewest Bank “tall building” Attorney(s)
I hope this info will help others fighting the good fight here in California.
Stay Strong,
Steven Mark Rosenberg, MRED
[email protected]

[Ebenezer Scrooge]

I'll agree with most of Professor Levitin's post, with one big reservation.

Just because somebody must determine compliance with law does not mean that the somebody has to be a lawyer. You don't need a lawyer riding shotgun in your car every morning, even though you need to comply with traffic law.

If "compliance with law" in the ad means conformity with some kind of compliance manual, there is no need for a lawyer, unless there is an obvious hole in the compliance manual. The compliance manual, of course, needs to be prepared by a lawyer.

[Franklin]

The underlying problem is that our title and recording systems have been fatally undermined with respect to residential real estate transactions between 1998 and 2008. First came MERS coupled with a huge number of gaps in a huge number of loans files. Second came LPS et al and widespread forgery in an attempt to cover up the aforementioned gaps.

The banks would like us now to blithely accept their version of the "truth" about who owns what, which is tantamount to arguing that their forgeries are "good" while others' are "bad."

Instead, the only valid, indisputable and real legal indicia remaining as to who owns what is possession. The "paperwork" and public records establishing legal ownership and mortgage interests in properties for residential real estate transactions from 1998 to 2008 have, as a whole, been so corrupted and undermined as to have no legal weight.

So possession is all that we have left of the truth, and the banks created this situation by their own actions, first, by failing to legally perfect the mortgages they issued and packaged so greedily and hastily, and, second, by engaging in widespread criminal forgery.

Hence, across-the-board mortgage relief would simply reflect the legal reality of the situation that we face. This will create moral hazard, but it is the only choice we have. The predatory mortgages and the pyramids of securities and derivatives built thereon have been rendered, by the banks' own actions, empty, meaningless and untethered to chains of title and valid legal claims of ownership. All we have left of that is indisputably true about "who owns what" is who is actually in possession.

There would be nothing unprecedented about across-the-board mortgage relief. Debt amnesties have been common throughout history, and the government has been generous in viewing the liabilities of the banks as mere social arrangements as opposed to binding obligations.

The obvious solution - given the mess that the financial industry has created - is to leave the homeowners out of it, forgive their mortgage debts, and let the financial institutions argue amongst themselves as to who will bear the huge costs of their predatory lending, fraud and forgery.

[John]

Your arguments sound exactly like those of our corporate attorney who indicated that my professional mortgage staff couldn't possible review condo documents to ascertain if they met FNMA and FHLMC criteria because the staff were not attorneys.

That is BS. Having worked with professional servicing personnel dealing with foreclosures and bankruptcies I've found most are significantly more capable and knowledgeable than most attorneys.

Remember that the issues with Florida foreclosures were caused by law firms to whom the work was outsourced. That goes with most judicial foreclosure states. The servicers outsourced the foreclosures to local attorneys.

[Adam Levitin]

John, just because I doubt the ability of non-attorneys in this area doesn't mean that I have a lot of faith in attorneys. Foreclosure work isn't the filet mignon of legal work, and it gets a lot of attorneys whose ability and training is such that, well, I wouldn't want them representing me for anything. I wouldn't issue them a malpractice policy for pretty much any premium.

But then I'm also someone who thinks that entry into the legal profession should be MUCH more tightly controlled. The ABA is grossly irresponsible in granting accreditation to the number of schools it does, and state bar examiners need to be MUCH more demanding (and also examine more relevant topics).

[Ivan Posey]

Prof. Levitin

A great article. Thank you

[Ebenezer Scrooge]

Adam is right on the ability of too much of the bar, but he did not address John's point. Nonlawyers are perfectly capable of reviewing documents for legal compliance if they are properly trained, and the trainers have the input of high-quality attorneys. And there is nothing unethical about this, especially if lawyers are available for unusual documentation patterns.

Since Adam admitted that he is just a simple law professor, maybe he should have a chat with the general counsel of his university. The GC probably uses contract paralegals, and probably does not review their every move.

[Grownup]

I have zero legal training yet even I can see that the author's post is either insincere or (less likely) delusional.

Most compliance work, whether in housing, finance, or anything else, is performed by clerks equipped with checklists and other detailed but simple instructions.

Now, when Adam Levitin hears the word "clerk," he probably thinks (first, last and only) of a former Law Review editor currently employed as right-hand-man or woman to a Supreme Court justice. But to the rest of us -- including most lawyers and law professors, I would hope -- "clerk" means a low-level white-collar worker, in many cases paid no more than 200% of minimum wage. Senior lawyers (such as chief compliance officers) influence the creation of the checklists and instructions the clerks work from; junior lawywers may spot-check the work of the clerks, but that's all.

Bottom line: Divining something unsavory about the arrangement "exposed" by that job ad, bespeaks a taste for paranoia and/or propaganda.

Adam sounds like someone who wouldn't be comfortable with nurse's aides, or even licensed nurses, looking at hospital patients' charts.

[Tien]

Lawyer Kramer and Kaslow doing the Lawsuit for me he amended 2 time in the Amended Complaint a bout 3 month I went to LA Court and got a Certified Copy They are Real, but in August Kamala get bought by the bankters and shut the Attorney Kramer and Kaslow down. do You Know how could I start to sue “California Attorney General Kamala Harris” because she shut the Kramer and Kaslow down. To me I fell she is Land Pirate
Lawsuits California Attorney General Kamala Harris "acted as the pawn of America's most powerful banks" when she seized ATTORNEYS FOR HOMEOWNER’S legal files and denied THE HOMEOWNERS the right to the legal counsel of my choice. shut Lawyers down so I couldn’t have a change to safe my home, you guide don’t be fool look at what the Bank did to us go to "4closure Fraud" “foreclosure hemet”and al so rent the Movie "inside Job" every one shout watch look at how the Bank set us up to be slavery for them. It is not a millions home owner seat in the kitchen one day and decided to take a Ecology down, it is well lay down by the Bankters, and if any Attorney stand up for us and have Government like Kamala Harris take money or wet kiss from the Bank and close the law firm down, soon or later no Attorney will be take the risk to representing for us.

http://www.youtube.com/watch?v=RZgZeAOaq4U&feature=youtu.be
http://www.youtube.com/watch?v=cCRnkamitVk&feature=youtu.be

[Adam Levitin]

Scroogie and Grownup: you're making a really stupid argument here. You're arguing that just because compliance work is usually done by unskilled workers, it's not a big deal that this compliance work is being done by unskilled workers.

There are two huge flaws in that argument. First, just because compliance work is typically done by unskilled workers doesn't mean that it's a good idea to do so or that it's done competently. Compliance work is a CYA operation. The use of unskilled workers is an economic move on the theory that most of the time there won't be a problem. Think of it as a form of underwriting. It's the same move as having first year associates do diligence. First year associates wouldn't know a huge potential liability if it were staring them in the face. But it's a way for law firms to bill lots of hours and leverage partners. Outsourcing foreclosure reviews to India would be good economics for the banks.

Let me put it another way: most compliance work, including diligence done by law firms, isn't worth the candle. It's generally malpractice. I know this because I've done it. I've seen diligence done well by partners, but I've yet to see a junior associate really know what to look for when doing diligence.

Second, this isn't a normal business matter anymore. Let's remember that we're talking about kicking families out of their homes. Do you want to have the "clerk" from the 7-11 making that call? (And after the movie Clerks, that's what I associate with the work clerk, thank you very much "Grownup.") Paranoia? They banks did this once already--that's why they're in trouble. Why is it paranoid to see this as evidence of them trying to do it again? It's just smart economics on their part. That doesn't mean I have to like it.

A registered nurse is something entirely different than a high school graduate who is looking at legal documents. A registered nurse is trained extensively to perform certain medical jobs. It's not compliance work. But I wouldn't expect a registered nurse to be able to diagnose complex conditions. You can train a paralegal or even program a computer to look for routine issues, but that's quite different from training them to deal with novel situations, much less make complex legal judgments. (Determining whether a harm is legally cognizable is a legal question--it doesn't go to a jury.) Put differently, you can train someone to do rote tasks. Training them to think is another matter. And training them to think and work in a technical field--well that takes technical training.

Sure you can sub in your unskilled worker and it'll be cheaper, but let's not pretend that we're getting a meaningful review at that point. That's all.

[Wingo]

"Assuming 2000 hours a year, that's $38-$46k.... This isn't what one pays to get someone with the relevant background for determining legal questions examining the files. At least it isn't being outsourced, like a lot of the foreclosure work itself."

Prof. Levitin, you apparently have not been in the market for a LSC or legal services attorney position. They make comparable salaries while trying to reconstruct what the reviewers and servicers did wrong.

[Not a Child]

You are a little off target on your evaluation "professor". Excuse me for saying, I know your an intelligent individual when it comes to law, but your jumping the gun with your assumptions creating a false fear. The banks have fully qualified individuals like myself gathering support and documentation to refute or support each customes claim. Hours per file are spent even before these are sent to the "level 2 reps" you speak of, and yes we are aware of what HDC is. It is actually more cut and dry then you make it out to be, your opinions appear to be out of anger and or frustrations from your own personal experiences. I hear what your saying and there are probably banks out there that aren't as thorough as the one I work for so I can't speak for all of them but you really should get your facts straight before badmouthing (not that some institutions don't deserve it); A lesson I would assume a professor teaches their students. You have good points but your also creating a false image of what is really happening and your doing so off of your own assumptions. Have some faith! Be patient, your entitled to your opinion

[Adam Levitin]

Wingo--the competence of LSC attorneys varies widely. Some are amazing and some, well.... Compensation doesn't have a 100% correlation with competence, but LSC attorneys are also getting compensation by "doing good." That's why a lot of people are willing to do that work given the limited compensation. The satisfaction that comes from robosigning? Not at all clear to me.

Not a child: You never state what makes you "a fully qualified individual". Care to elaborate? I can tell you exactly what makes me a "professor"--there are detailed qualifications I have to have for it relating to education, publication, time of service, and peer evaluation.

If you know what an HDC is, then don't you have to determine the date on which an assignment happened in order to know if you are an HDC? And that means looking at the PSAs. I'll lay down hard cash that no "level 2 rep" or "fully qualified individual" has ever done--heck. It's not enough just to know what a HDC is--you also have to be able to make the determination of whether you are one, and I don't think that's within the ken of a "fully qualified individual like [your]self".

My point here isn't to crap on you, but to observe that if we want to take foreclosure law seriously, we can't do it via low-cost labor and economies of scale--it becomes more of an artisanal--and much more expensive--endeavor. Punctilious observance of the law isn't easy or cheap. But I would argue that we need to take care when we throw a family out of their home. If we're going to do it, it's got to be done by the book.