Wash Post: Some judges chastise banks over foreclosure paperwork

During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and government officials are taking action after discovering that many mortgage documents were mishandled.

Washington Post Staff Writer
Tuesday, November 9, 2010; 12:07 AM

EAST PATCHOGUE, N.Y. – A year ago, Long Island Judge Jeffrey Spinner concluded that a mortgage company’s paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so “repugnant” that he erased the family’s $292,500 debt and gave the house back for free.

The judgment in favor of the homeowner, Diane Yano-Horoski, which is being appealed, has alarmed the nation’s biggest lenders, who say it could establish a dramatic new legal precedent and roil the nation’s foreclosure system.

It is not the only case that has big banks worried. Spinner and some of colleagues in the New York City area estimate they are dismissing 20 to 50 percent of foreclosure cases on the basis of sloppy or fraudulent paperwork filed by lenders.

Their decisions illustrate the central role lower court judges will have in resolving the country’s foreclosure debacle. The mess came to light after lawsuits and media reports showed lenders were routinely filing shoddy or fraudulent papers to seize the homes of borrowers who had missed payments.

In millions of cases across the United States, local judges have wide latitude to impose sanctions on banks, free homeowners from their mortgage debts or allow the companies to proceed with flawed foreclosures. Ultimately, the industry is likely to face a messy scenario – different resolutions by courts in all 50 states.

The foreclosure dismissals in this area of New York have not delivered free homes for borrowers. With so much at stake, lenders in this part of New York are aggressively appealing foreclosure dismissals, which is likely to keep the legal system bogged down, foreclosed homes off the market, and homeowners like the Yano-Horoski family in legal limbo for years.

“We believe the Yano-Horoski ruling, if allowed to stand, has sweeping and dangerous implications for the entire mortgage lending industry,” said OneWest Bank, the family’s mortgage servicer.

The situation in Suffolk and Nassau counties on Long Island and Kings County in Brooklyn- which have among the highest rates of foreclosure in the state and where the 81 judges handling foreclosures have become infamous over the past few years for scrutinizing paperwork for errors – provides a window into how the crisis could unfold across in the country.

While the level of tolerance for document mistakes varies from judge to judge, the group as a whole has a reputation for ruling against mortgage companies when paperwork issues or other problems arise. At least one bank, J.P. Morgan Chase, requires document processors to separate foreclosures cases from these three counties from those in the rest of the country. A high-ranking executive of the company is specially assigned to sign off on the area’s foreclosure filings.

Judge Dana Winslow of Nassau County says he’s thought a lot about why judges in his area are more apt to question filings. He said it comes down to one thing: Lack of trust for Wall Street. In this region, judges have seen a lot of inaccurate filings from the financial sector.

Trust “of the lending institutions and Wall Street has eroded in some areas of the country more than others,” Winslow said.

Craig D. Robins, a foreclosure defense attorney who authors the Long Island Bankruptcy blog, said of the Yano-Horoski case: “I think we’re going to see more decisions like this across the country. Many judges are finding their court calendars clogged with cases that have all these flaws in them that never should have been brought in the first place or should never have been brought without more due diligence.”

Going forward, mortgage companies trying to foreclosure in the state of New York will face stiffer requirements. On Oct. 20, the state’s chief judge said attorneys for lenders will have to vouch personally for the accuracy of documents.

“We can’t have the process being a fraud,” New York State Chief Judge Jonathan Lippman said in announcing the new procedure. “It has to be real and based on credible information.”

Even before Lippman’s order, however, lower court judges were already raising questions about faulty paperwork in foreclosures.

On June 17, for example, Judge Karen Murphy of Nassau County ruled that Wachovia Bank lacked standing to foreclose on a home because the document used to prove ownership of the mortgage was incomplete.

On Sept. 21, Judge Peter Mayer of Suffolk County delayed a foreclosure by Ally Financial’s GMAC mortgage unit after noticing that the paperwork transferring the mortgage to the bank was dated two days after the foreclosure was initiated.

And on Oct. 21, Judge Arthur Schack of Kings County dismissed a OneWest foreclosure motion because the bank had not adequately documented how the mortgage had been sold and resold to investors. He also questioned why the employee who signed many of the documents claimed to be a vice president of several different mortgage companies at the same time.

In a different case in May, Schack ruled that HSBC Bank could not foreclose on a home because the paperwork that assigned the mortgage to HSBC from the original lender, Cambridge, was “defective.”

That didn’t mean the borrower, Lovely Yeasmin, a 28-year-old cashier who immigrated from Bangladesh, got her three-story townhouse in Brooklyn’s Bushwick neighborhood for free. Wells Fargo, the mortgage servicer for HSBC, has not appealed the case. Instead, it has offered to temporarily lower her monthly payment from $4,700 to $3,000.

Yeasmin’s eldest brother, Mohammed Parpez, 35, said that before the judge’s order, Wells Fargo was resistent to a loan modification. “The banks are crooks. They tell everyone they are trying to help people like us, but they are really doing the opposite,” Parpez said.

Tom Goyda, a Wells Fargo spokesman, said that although the company “disagrees with the court’s findings,” it is continuing to try to work out a longer-term solution with the family.

Members of the Yano-Horoski family said they struggled similarly to get their lender to modify their loan after Greg Horoski fell ill in 2005 and his online business selling specialty dolls suffered. After he underwent a triple bypass surgery, two stents and two hip replacements, he and his wife, Diane – who teaches an online English composition course – found themselves unable to pay the bills.

Despite his pleas, Horoski said, he failed to get OneWest to come to an agreement, even though he became able to pay the debt after his company’s sales picked up.

In his November 2009 ruling, Judge Spinner of Suffolk County blasted OneWest for negotiating with an “opprobrious demeanor and condescending attitude.” He also cited the bank’s “duplicity” in offering a forbearance agreement with a deadline that had already passed and for presenting contradictory paperwork claiming different amounts for what the family owed.

With their case under appeal, the Yano-Horoskis now find themselves in a tricky position, wary of putting more money into a house that an appeals court could take away from them. While the other houses on their quiet suburban street are meticulously maintained, their front-porch light remains shattered and the paint on their house is peeling.

They’ve shelled out $3,000 for a new hot-water system. They paid $2,000 for tree trimming after a neighbor complained. But they’ve let the $10,000 property tax bill become delinquent, and they worry an appeals court could not only reverse the earlier ruling but demand that the family pay back the mortgage for every month that has passed since.

Nonetheless, Horoski remains optimistic.

“People thought people who didn’t pay their mortgages were automatically deadbeats,” he said. “People are educated now. They are realizing all of a sudden how many hundreds of thousands of these homes that were foreclosed may have been done so with fraudulent documents.”

Staff researchers Julie Tate, Alice Crites and Magda Jean-Louis contributed to this report.

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24 Responses

  1. [...] This post was mentioned on Twitter by Mario, Wanta Freedumb. Wanta Freedumb said: Wash Post: Some judges chastise banks over foreclosure paperwork: http://t.co/5e5xAfr [...]

  2. Thank you every one for your support and good advice. In addition to neck and back injuries from two accidents when guys ran lighs, I have to go in for cancer surgery and treatment. I should have had surgery on Friday but since the CALIFORNIA JUDGE denied my motion to recall writ for possession, I have to be out by 6 .a.m. Suday Nov 14. I have no place to go except a motel – great for recovering from surgery!!
    I will find out the name of the judge on Friday. Courts were closed today. I will contact the A.G. and the Huffington Post. Thank you all so much.

  3. unbelievable story, banksters at their worst !!

    The Real Reason America’s Cities and Towns Are Broke
    How the nation’s biggest banks are ripping off American cities with the same predatory deals that brought down Greece

    http://www.rollingstone.com/politics/news/12697/64833?RS_show_page=0

  4. BK question. Anyone?

    If in chapter 7 it is determined that the mtge creditor has no standing and is tossed, the debt is then stripped. Does that creditor have the right to perfect its claim, as in a ruling without prejudice in regular court proceedings?

    And if the creditor is shown to have no standing, what keeps another creditor/entity from stepping in and claiming standing? How does this work?

  5. Bank of Amerifraud is at it again This time they are messing with our Veteran and his credit card

    http://www.latimes.com/business/la-fi-1112-lazarus-20101112,0,5977543,full.column

  6. FDIC Prepares To Crack Down On Officials Of Failed Banks
    Posted on November 11, 2010 by Foreclosureblues
    FDIC Prepares To Crack Down On Officials Of Failed Banks
    Today, November 11, 2010, 3 hours ago | Lori KellyGo to full article
    Dozens of former officers and directors are advised to work out settlements or face legal action for their alleged misdeeds during the financial crisis.

    The FDIC warns bank officials that it’s time to sit down and work out settlements in fraud and breach of fiduciary duty cases, or head to court to decide the matters there. (Patrick Fallon / Bloomberg)

    Dozens of former officers and directors are advised to work out settlements or face legal action for their alleged misdeeds during the financial crisis.

    By E. Scott Reckard, Los Angeles Times
    9:38 PM PST, November 10, 2010

    For former insiders at some of the several hundred banks that collapsed during the financial crisis and in its aftermath, a day of reckoning has arrived.

    The Federal Deposit Insurance Corp. has told dozens of former bank officers and directors that it has drawn up lawsuits accusing them of misdeeds such as fraud and breach of fiduciary duty. The federal agency is seeking damages to help offset losses in the nation’s deposit insurance fund.

    It’s time, the FDIC warns these officials, to sit down and work out settlements — or head to court to decide the matters there.

    The letters being sent by the agency are “very detailed,” said Jeffrey A. Tisdale, a Los Angeles lawyer for former officials of five banks targeted by the agency.

    “I mean eight to 10 single-spaced pages of purported misdeeds,” he said.

    The showdowns follow FDIC probes that typically take well over a year.

    “We’re only doing this after careful investigation. We don’t bring suit every time a bank fails,” said Richard Osterman, the FDIC’s acting general counsel.

    The FDIC board has authorized suits seeking to recover more than $2 billion from more than 80 former bank officials, up from about 50 a month ago, Osterman said. The number could multiply as the agency works through its investigative backlog.

    The agency could end up suing or settling with former insiders of about one-quarter of the more than 300 banks that have failed since the start of 2008, officials say.

    “This is only the first wave,” Tisdale said. “I’ve got my next five-year professional plan laid out pretty well.”

    Although the FDIC says it will try to settle the cases, officials expect to file a significant number of suits. Criminal charges could result in a few cases.

    “We are investigating [criminal] bank fraud and related cases in many different parts of the country, including in California,” said Fred Gibson, deputy inspector general at the agency.

    So far only two civil suits have been filed. The first, filed in July, accuses four executives of Pasadena’s defunct IndyMac Bank of negligence in granting construction and development loans that the suit says were unlikely to be repaid. The defendants are contesting the suit, which seeks $300 million in damages.

    Last week, the FDIC sued 11 former insiders at defunct Heritage Community Bank in Glenwood, Ill. Calling the case “regrettable and wrong,” defense lawyers said in a statement that their clients, in failing to foresee the economic meltdown, were no different from Wall Street and the FDIC itself.

    Tisdale concurs that the FDIC is going after people for failing to accurately predict the future.

    “The economy is the real culprit here,” he said. “There was no way to plan for real estate values dropping 30% to 50% throughout California, Nevada and Arizona.”

    But Darren Robbins, a San Diego lawyer who specializes in filing investment fraud suits, says the FDIC has plenty to work with just by looking at what banks said about their assets toward the end of the boom.

    “It’s our belief that in places like Illinois, Georgia, California and Arizona there was an inordinate amount of game-playing with financial statements in ’07 and ’08,” said Robbins, whose firm has fraud suits pending against several casualties of the bust, including PFF Bancorp, the former parent company of Pomona’s PFF Bank & Trust, which failed in November 2008.

    In targeting the former officials, the FDIC typically also has its eyes on insurance companies that would be on the hook for damages stemming from alleged misconduct by the bankers. In many cases, the FDIC formally gave notice of possible litigation months ago, just before the expiration of the relevant insurance policies, to ensure that the coverage would apply.

    Some policies covering directors and officers don’t apply to actions by the FDIC. In such cases, the agency is going after bank officials only if they have sufficient assets to justify the expense and risk of litigation, Osterman said.

    The FDIC’s litigation strategy borrows from a playbook the agency used after the savings and loan meltdown of about two decades ago. From 1986 through 1996 the FDIC recovered $5.1 billion from former insiders at failed banks and savings and loans, Osterman said. That’s a small fraction of the eventual cost of the S&L crisis.

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  7. Diana also contact the Huffington Post. or Richard Fine, Esq He has fought the judicial system in California and maybe he can refer you to somebody. His Daughter works for the Huffington post and maybe she can help. Also Google the judge’s name maybe he has some enemies and you can find out information on the Judge.

  8. Diana: So are you going to have an attorney help you fight it? I would follow A-man’s advice & complain to AG. I know of a couple people who are fighting back after losing their home in So Cal, but not sure how the battle is going. They too have robo signers & fraud.

  9. Superior court (U.D. court, Sacramento, CA)
    In pro per. Had many exhibits attached. An attorney looked at it and said I had a 95% chance of winning!!!

  10. Superior court (U.D. court, Sacramento, CA)
    In pro per

  11. @diana – was this the superior court or fed or BK court? Were you pro per or did you have an atty?

  12. Thanks for the advice. Neil said I should report this to AG Jerry Brown as well. I was fighting a UD by Aurora.
    I WAS GIVEN ONLY 4 DAYS NOTICE. Judge would NOT even extend the time. I got the notice TUESDAY. Have to be out Monday Nov 14 at 6 A.M. !!!!!

  13. Diana who are the judges and it is time to file criminal charges against these judges to the attorney general.

  14. not true in California. Judges LOVE the banks, loan servicers and MERS.

  15. The judges siding with homeowners may be true in other states. IN CALIFORNIA (Sacramento) JUDGES LOVE THE BANKS – ESPECIALLY AURORA LOAN SERVICES LLC. Despite proof of fraud, robo-signers, MERS and Cal Western collusion, the judge ruled in favor of Aurora.

  16. The following link is to a scribd account that is posting numerous pleadings in two cases near and dear to my heart: In Re Wilson in Louisiana BK and In Re Hill In PA BK.

    http://www.scribd.com/wjr__10

  17. DEUTSCHE BANK NATIONAL TRUST COMPANY OBJECTS TO SUPONEA FOR LOAN LEVEL FILES. THIS IS THE ISSUES THAT OCCUR WHEN THE DOCUMENTS ARE NOT ACCURATE.

    http://www.scribd.com/doc/42076306/Deutsche-Banks-Objection-to-Third-Party-Suponea-on-Deutsche-Bank-National-Trust-Company-as-Trustee-letter-From-Megan-11-11-2010

  18. I will Take the zip code I live in “30062” To make my home available on Thursday’s form 6- 7:30 (second and forth of each month) to have a small meeting for a large problem.
    “Social event” to discuss the “strategy”
    about how “we the people” are going to foreclose against the “Wicked bankster’s” and their “paper pushing robots”.
    HOW?
    The only way to fight back is by a “majority vote” and play the same “commerce game” in “reverse” by starving them
    for cash, from the cash flow of all Mortgages across America beginning DECEMBER 1, 2010. I am certain “We” will have there Full attention, and not only that, but as they dole out their pornographic profits from their Practices at the expense of us the tax payers, they are likened to the likes of “to whom men hide there faces from”, now we get to do the kicking…
    Take your fake papers and Shove it 7up!
    “The American People” are not Governed by the Banks, the banks know this and still try to control us by fear!
    We must
    STARVE THEM OF CASH FLOW THE EXACT WAY they did it to us, THEY SET US UP!
    It might shock some of you, however I know it works and I
    can without a doubt tell you its true they will have our attention and this time we make the rules, as they have been written By the Men of Honor who drafted
    “The United States Constitution”. For when the Banks have taken over by there Cold, Cruel, and Calculated plan to confiscate our wealth, Homes, and even Strip us of our Property by force, Force Majour
    and trick us into a trap, as they have shown by the revelations of there wicked “Deeds” (no pun intended)
    “What are you going to tell our children, their children after the arrogant attempt to Strip us of our Property?
    Contact me at “thetruthexposed@gmail.com”

  19. PROPUBLICA STORY—IT IS GOOD USED FOIA TO GET RECORDS ON THE MONEY SPEND TO SAVE HOMEOWNERS–MAKING HOME AFFORDABLE–
    ONEWEST GOT $ 8 MILLION FOR SERVICING THE INVESTORS $ 4 MILLION, BORROWERS $ 00.00. YES THAT IS ZERO. YOU CAN LOOK UP YOUR SERVICER.

    http://www.scribd.com/doc/42066095/OneWest-Bank-Eye-on-the-Bailout-Pro-Public-A-12-5M-has-actually-been-disbursed-Aug-10-2010-12-5M-Borrower-0-Investor-4-457-419-Servi

    http://www.scribd.com/doc/42066320/Making-Home-Affordable-Eye-on-the-Bailout-Pro-Public-A

  20. HOW in the world are these reporters missing the worst part of this! They keep regurgitating the same “facts” about robo-signers and fraudulent paperwork. While relevant, all of that is old news, thus barely listened to, about a minor symptom of the insidious disease.

    The propaganda psychology of “deadbeats” getting free houses, which we all know has happened rarely, is dividing the nation about this issue. WHEN will someone in the media start telling homeowners current on their mortgage about the clouded title they are making payments on each month! The blogs are full of hate and unwarranted accusations toward ” stupid, deadbeat homeowners.” Yet they ignore The New York Times study stating that the RICH are defaulting far more than the rest.

    http://www.huffingtonpost.com/2010/07/08/rich-mortgage-defaults_n_640288.html

    We need to educate everyone we know or meet. I’m going to make a list of SIMPLE facts and have it ready for blogs, to alert the naysayers about how this affects EVERY homeowner. Let’s all hit the social sites and blogs and post like crazy! We cannot just sit idly by while the foundation of our constitution is trampled, yet again. Sad to say, the Constitution has been stomped on so often these days that citing it is old hat too. That gives us little to do but focus our appeal to everyone we know (and strangers) with the facts of how this affects THEIR home ownership, or future ownership, whether or not they are in foreclosure or have a MERS-related mortgage. If they know they are giving a pound of flesh, we might bring together enough homeowners to fight this…and remove the blight of being called “deadbeats” who want a free house. We must control the narrative.

    Obama added to the attack against us. I never thought I would hear an American president call millions of unemployed and underemployed Americans in foreclosure deadbeats. How dare he!

  21. THIS IS CRIMINAL. THEY ARE GOING AHEAD AND MAKE EMORTGAGES LEGAL SO THAT THE COURTS WILL THINK THAT IT IS OK TO SHRED NOTES AND DO IT ELECTRONIC TRANSFERS. THIS NEEDS TO BE STOPPED.

    Origination News – E-Mortgage Move Would Represent Industry Shift
    A California mortgage lender says its partnership with a technology and warehouse funding provider made it the first to use a warehouse line of credit to originate a fully electronic mortgage and sell it directly to a government-sponsored enterprise. The transaction represents a unique mortgagee/warehouse lender relationship that’s rarely seen in the mortgage industry. If it catches on, it would represent a dynamic shift in how warehouse lenders operate.

    Like what you see? Click here to sign up for the Origination News daily newsletter to get the latest news headlines, statistics and feature stories on topics of interest to mortgage originators.
    San Ramon-based CMG Mortgage said its first two e-notes were originated with all-digital disclosures and e-signatures before it was funded electronically, transferred to CMG’s warehouse lender and the sold to Fannie Mae, making it among the first nondepository mortgage lenders to write such a loan.

    The benefits of e-origination are numerous, the company said. The process removes paper, and allows for the digital transfer of documents and signatures. By transferring the loan to the secondary market electronically, the time it takes to get the loan off the lender’s warehouse line of credit was reduced from two weeks to two days, improving the lender’s cash flow capabilities.

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