Did Scott Brown Facilitate Predatory Loans?

There's no question that we at the Slips take a particular interest in the Massachusetts Senate race. But usually we don't have much to say about it. Still, something Scott Brown said today struck me as rather significant--much more so than a lot of the things that have been covered in the media about the Senate race. 

It turns out that Senator Scott Brown (R-Mass.) is a real estate attorney among other things. (Beats modeling, I guess.) Brown apparently did real estate closings and title work.  His clients included local banks as well as some "mortgage companies," including some that are no longer in business, as well as Fidelity National and First American, two large real estate services companies that provide a range of services, including relating to foreclosure.  Fidelity National, is also the former parent of LPS, which owned DocX, the document forgery firm featured on 60 Minutes and home of the Robosign. LPS is under a consent order with the Federal Reserve Board for its servicing activities, and DocX was criminally indicted by Missouri (and subsequently settled). Brown was doing work for Fidelity National when it still owned LPS. 

It's not clear exactly what Brown was doing for these clients--title work sounds innocent and boring enough, and Brown certainly isn't responsible for all of his clients' misdeeds.  But at the very least, Brown's association raises a host of questions. Who were those "mortgage companies" that he worked for?  It's nice that Brown named a bunch of local banks, but I wonder what lies under the "mortgage company" label?  What did Scott Brown understand about the mortgage market he was facilitating? Did he recognize that there was a bubble?  (He was a town property assessor at one point, so one would think he'd notice this sort of thing.) If not, what does that say?  And if so, what does that say? How many predatory loans did Scott Brown facilitate?  How many of the loans where he handled the closing resulted in foreclosure?  What would he say to those families that lost their homes to predatory loans?  

I suspect that Brown's reply to these questions would be "Aw shucks, I'm just a guy with a pickup truck with 238,000 miles on it who was helping people out by doing the paperwork on their real estate closings."  That's not good enough. Either Brown was so inept that he didn't see that the loans he was closing were becoming untenable or Brown saw the problem and didn't do anything. As long as the music's playing, the guy's gotta earn a living, right?

Obviously as a legal matter, the attorney handling a real estate closing has no duty to shield people from making a bad business decision (particularly if he's representing the bank). But there's a character and ethics issue here. In the first Massachusetts Senatorial debate, Brown said that he thinks character is an issue and that it is the litmus test for being a Senator.  Mere compliance with the law isn't always a passing grade on character.  I'd certainly like to know more about his real estate practice before concluding that he's passed his own test.

At the very least, it looks like Scott Brown was riding the mortgage bubble, serving as a cog in the machine.  We know that Senator Brown was carrying water for Wall Street when (as his singular notable Senatorial accomplishment) he weakened the Volcker Rule that was aimed at preventing federally-insured banks from engaging in risky heads-I-win/tails-taxpayer-loses trades. Was undermining the Volcker Rule just a continuation of a career carrying water for the banks? 

Comments

[scott r]

Sir, are YOU ever going to revisit YOUR discussion on UCC 9. People/ lives, are hanging in the ballance out here. PLEASE!!!!!!

[Andrea Thompson]

The idea that conducting a real estate closing for people voluntarily entering into a contract with a bank is facilitating the mortgage companies nefarious activities is ridiculous. It is not the job of an attorney at a loan closing to determine if the loan was the right decision for the borrower nor is the attorney in collusion with the mortgage company. People who close loans are there to be sure that no fraud is involved in the execution of documents and the title is clear. That's it! I usually agree with things posted on this site and I hate to defend Scott Brown since Elizabeth Warren is my hero but this goes too far.

[Adam Levitin]

Andrea--the job is how you define it. This isn't a question of malpractice. It's a question of ethics, which is about character. The argument you make is, by analogy, that the guy who makes sure the trains run on time has no responsibility for what the trains are carrying or that the ship's captain doesn't have a responsibility for what's in his ship's hold. That engineer or captain is not the same as the person who loaded the train or ship, but is part of the process. A lot of bad things happen in the world because of that attitude.

[Stephen Brown]

Adam, I'm almost totally with Andrea on this one. I have gone through three closing in the last three years (purchase plus 2 * refinancing). I am loathe to agree that, in general, the attorney who acted as title agent should be held responsible for any of my decisions.

However, if it were the case that a title agent was, implicitly or explicitly, part of what appear to me to be conspiracies among members of the real estate industry, to promote predatory and unsuitable loans, I would hold them responsible.

[Wandering Mind]

I have practiced law in Massachusetts for over thirty years and am familiar with both Fidelity National and First American. As far as I know, their role in real estate transactions in Massachusetts is to provide title insurance. If they were doing more than that in Massachusetts or elsewhere, I for one was unaware of it.

As for awareness of the real estate bubble, having also been an assessor and having observed the bubble in real estate in Massachusetts in the 1980's and the 2000's, I was aware that the prices did not make sense in either period. Other attorneys in Massachusetts with whom I have contact were also aware of the irrational exuberance in the market.

As for the substance of the loans themselves, since I did not do much work for mortgage companies I was not faced with the kind of dilemma which a colleague of mine, who was doing a substantial amount of work for various mortgage companies and brokers, was faced with.

She finally decided that she could not do closings for some mortgage companies when she overheard a mortgage broker telling a borrower signing up for an adjustable rate mortgage not to worry about potential interest rate increases in the future because there would be no problem in refinancing when the time came.

On the other hand, her decision was the exception to the rule that, as long as the persons signing the loan were who they said they were and there did not appear to be any "under the table" financing or commercial bribery going on, the lawyer was there to get the deal on record and transmit funds to the parties who were entitled to them. Nothing more.

So, if Scott Brown fell into the latter class of attorneys, he had plenty of company.

I should add that the criticism to which the lawyers of the Commonwealth are subject is not limited to their role in doing title work for predatory lenders.

For example, it is my opinion that the Real Estate Bar Association in Massachusetts was deeply influenced if not controlled by title insurance company and banking interests in the controversies over foreclosure procedure which have made their way to the Supreme Judicial Court recently.

You will note that REBA sided with the banks in the Ibanez case, filing an amicus brief sympathetic to the foreclosing bank's position. This is significant because of the way the lower court (a court specializing in real estate, which is why it is called the "Land Court") characterized the law involved in Ibanez as being ancient and therefore easily resolved by any lawyer who is even marginally competent.

Yet, REBA had adopted a title standard which was the opposite of the Land Court's ultimate ruling, based on that ancient law. (Virtually every purchase and sales agreement in Massachusetts incorporates REBA title standards as the reference for resolving title issues).

There are other examples of plainly erroneous positions which benefit either title companies or banks which attorneys doing closings or foreclosures go along with, such as the procedure in pre-Ibanez foreclosure.

Again, if Scott Brown did not buck the system when he was doing real estate closings, he was in the majority. If that disqualifies him from being a U.S. Senator, then the pool of Massachusetts lawyers who could be considered qualified just shrunk dramatically.

[Ben]

I'm with Andrea too, Adam. I fail to see why Scott Brown should be held accountable for the fact that a lot of individuals entered mortgage contracts that they didn't fully understand, while the banks willingly offered them those contracts.

Why aren't you writing posts that blame BIC and Pilot for creating the pens that the two parties used to sign the contracts? I love Credit Slips, but this post doesn't belong here. This is a ridiculous attempt to pin blame on Scott Brown for something that was much bigger than him.

[Mike]

Its a lot like fencing stolen goods isn't it? You didn't actually steal anything, your just moving the goods down the line.

[Mike]

That's "you're" not your...duh

[Ken]

A lot of people have already jumped on the problems of blaming him if he recognized a bubble, but you also seem hard on him if he did not recognize the bubble.

"Did he recognize that there was a bubble? (He was a town property assessor at one point, so one would think he'd notice this sort of thing.) If not, what does that say?"

We still have people disagreeing about what period of time counted as the "bubble" and which was legitimate growth caused by ordinary market trends. Scholars still disagree about the timing and cause of the bubble.

But every former town property assessor should have been able to recognize the bubble while it was happening?

[Chris]

This is so far off the mark I hardly know where to begin. So now every real estate attorney who writes title insurance for Fidelity National (a perfectly reputable company) or one of its subsidiaries has his ethics called into question?? Every attorney who closed mortgage loans is a cog in some nefarious machine. I have conducted a conveyancing practice consisting largely of closing residential mortgage loans for 30 years and I'm telling you that this post is delusional, plain and simple. You should have talked to someone in the actual business you are so maligning before you showed your ignorance. And I guaranty that I know Scott Brown much better and despise him much more than you do.

[Adam Levitin]

I knew that I was going to tick a lot of people off with this post, and I probably should have been more careful in how I wrote it. My aim with this post was not to smear transactional attorneys. As I note below, I think their situation is more complicated than they might want to always admit, but the generic ethics of transactional lawyering are really not what's at issue here.

As I see, there are three separate issues here that are getting mixed up.

1. Fact questions. We really don't know much about Scott Brown's real estate practice. We ought to. It's amazing the energy that the Massachusetts media coverage has put into other issues, but we really don't know that much about Brown's business. There might be nothing of note there, but it doesn't seem like anyone has probed this, and our ability to talk about ethics requires knowing more about the facts.

2. Transactional attorney ethics in general. Legal profession ethics tend to focus on representation in litigation, and ignore attorneys' role in transactional ends when there is not patent fraud. This lets transactional lawyers take shelter in the Wernher von Braun doctrine:

"Once the rockets go up, who cares where they come down? It's not my department," says Wernher von Braun.

Adopting any other approach than the Wernher von Braun doctrine makes life suddenly very complicated and uncomfortable for anyone involved in transactional lawyering or transaction engineering more generally. (The lack of self-reflection from the legal industry on its role in the financial crisis is notable.) I think the issue is more pronounced for attorneys than say for bankers, because attorneys are a regulated profession. I don't claim to have this issue resolved philosophically, but I don't think it's a simple issue where one can categorically say that transactional attorneys are ethically immune from the effects of their clients' transactions.

But whatever one thinks about the ethics of transactional lawyering, there's a separate question here, namely:

3. Are there higher ethical standards for US Senate? However one thinks the attorney ethics issue should be resolved, Scott Brown has argued that there is a distinct character test for US Senate. That's his standard, not mine. Even if you are willing to say that there's no ethics issues for regular transactional attorneys, it's not apparent to me that one reaches the same conclusion when applying a more stringent standard.

The real issues here are #1 and #3. Unfortunately, the are getting confused with #2, which some folks are wrongly taking as a personal attack.

[Ken]

1) Agreed

2) I still think #2 is overbroad in its comparisons. Yes, transactional attorneys like those responsible for securitizing mortgage notes for sale, knowing that they were based on inflated prices and false statements of income, have some ethical responsibility for the bubble. I am sure other transactional attorneys do as well. But the attorney who did the Title work? Even if he believed there was a bubble, was he supposed to tell buyers that there's a bubble? Try to convince them that they really could not afford the home they were buying? If they have an attorney, isn't that an ethical breach? What if he's wrong about the bubble?
Title Insurer: Mortgage Fiasco is not akin to Missle/Rocket Builder: Missle Attack.

3) You're still saying that title insurers were in breach of good ethics. It may not be a breach worthy of malpractice, but you're saying it's a breach. If somebody acted ethically, then there is no breach no matter what standard you hold them to.

There's also the issue of implied incompetence. As I noted earlier, it's pretty hard to recognize a bubble years later, we're still studying it. But you say "(if he did not recognize the bubble), what does that say" while criticizing Brown for not recognizing the bubble while it was happening. That's not a Brown-only or Senate Candidate-only criticism. That's a criticism of anybody involved in real estate during the bubble.

[Chris]

Oh great. I feel so much better now. I'm not just a cog in a fraud spewing machine. I'm a fucking NAZI MURDERER. Are you kidding me? And where did you get the idea that legal professional ethics tend to "ignore" transactional pratice. WHAT???? How can you be a law professor and be so insanely ignorant of actual legal pratice?? Who told you that? What the hell is your source? Transactional lawyers who live in fear of certified letters from Bar Counsel?? I guess not. (People just don't realize how different it is to pratice a profession with strict ethical regulation and how different it is from business generally). And then we go straight to the assumption that any dissenters propose ethical "immunity" for transactional attorneys!!! Get a chance to take any logic courses dude? And then "are there higher standards for US senator?" OF COURSE there are and no one suggessted otherwise.

The case is simple. The only factual evidence you have is that Scott Brown wrote title insurance policies for Fidelity Finanacial. Like thousands of ordinary conveyancing attorneys who may, like me be early and loyal Warren supporters. And from that you speculate...well, a lot, including not caring about bombing and killing civillians.

Seriously dude. This is seriously awful work.

[Richard Davet]

One of the major players in the “GSE Business Model” is the title company and without their acquiescence and indifference to the fraud foreclosure would not be possible.

Long before my own case was featured on the front page of the Wall Street Journal the Audit Committee and General Counsel of First American Title was fully aware of the fraud upon the court by Bank of America.

See:
http://www.scribd.com/doc/108002066/Robinson

[Concerned Citizen]

Love it. Levitin has officially jumped the shark.

http://www.youtube.com/watch?v=MpraJYnbVtE

What a truly stupid and ignorant post. From a guy that's supposed to be a mortgage legal expert, too. If this is the level of expertise espoused in the hallowed halls of our finest academic institutions, we're truly doomed as a society.

[Adam Levitin]

This isn't the first time I've been accused of shark jumping, and I'll own it when I should, but I don't see what the problem is here. That I suggested that deal attorneys might have some ethical responsibilities, even when engaged in something as mundane as a real estate closing? If that's shark jumping, I'll do it 7 days a week and twice on Sundays.

Still, this post has clearly touched a raw nerve. And that speaks volumes. The idea that one might judge a lawyer's character by the activities of the lawyer's clients is one that many lawyers really don't like. But it isn't ridiculous.

Chris suggests that I'm utterly ignorant of what legal professional ethics has to say about transactional lawyering. There are jurisdictional specific rules that I do not claim to be expert in. But I do know the ABA's Model Rules of Professional Conduct. I know that the MRPC has an entire section (Rules 3.1-3.9) devoted to lawyer as "advocate." There is no equivalent section devote to transactional lawyering. Instead, there are some rules of general applicability (conflicts, confidentiality, handling client's money, and withdrawal from representation). None of them are tailored to transactional lawyering, and absolutely none of them suggest that there is any issue as long as the lawyer is not facilitating an illegal transaction. The problem is that lawyers think in terms of legality, and that's not the same as ethics. There are unethical transactions that are perfectly legal (or at least not facially illegal), including making a loan secured by a family's house on terms that are almost guaranteed to result in a default and foreclosure. You're entitled to disagree with me, but don't tell me that I don't know what I'm talking about unless you can cite chapter and verse.

Still, I owe Chris a clarification. We're all cogs in various machines. The von Braun and trains analogies are not meant to besmirch anyone or to equate foreclosure with genocide. The analogies are meant to underscore that facilitation is a fraught process and that facilitators cannot divorce themselves from the outcomes they facilitate. (And fwiw, the equation of lawyers with Bic pens is a false comparison--Bic pens cannot exercise judgment. People can.)

Finally, to the extent that these posts are upset that I suggested that there are even questions about Scott Brown, let me be clear: I have not accused Scott Brown of anything. I asked a set of factual questions that I think do have some implications about character. And I'd still like to see them answered.

[Sally Clark]

Scott Brown graduated cum laude from Tufts: ranked #28 in top universities by US News and World report

Elizabeth Warren graduated from the University of Houston, ranked #184 by US News and World Report.

Law Schools:

Scott Brown got his law degree from Boston College, ranked #29 in top law schools by US News and World Report

Elizabeth Warren got her law degree from Rutgers, ranked #82 by US News and World Report.

[Scott]

Because this is such moronic post on its face, I won't bother wasting my time explaining why.

[Contrarian]

"Still, this post has clearly touched a raw nerve. And that speaks volumes."

Posts attempting to demean an individual through speculation, without an iota of research, will touch nerves, because "asking questions" based on no data is irresponsible. That doesn't "speak volumes." It says nothing at all.

If you think there's something here, go do your research and THEN write about it.

[Lawdog]

Perhaps you've "touched a raw nerve" because as a supposedly intelligent lawyer, you've embarrassed the legal profession to advance an obvious political bias.

[Squid]

The lack of factual content in this ridiculous post "speaks volumes" about its author. It does not "speak volumes" about the commenters. It says nothing whatsoever about Senator Brown. The author "touched a raw nerve" because people want to read something informative and useful, and don't want to see clumsy hit pieces like this one.

Query: In his free time, does the author complain about the poor state of political discourse these days? If so, then look in the mirror, pal.