By Brian O’Conner
The only person jailed in connection with a foreclosure forgery scandal that swept through Michigan and the rest of the country after the collapse of the housing bubble spends her days confined to the Women’s Huron Valley Correctional Facility in Pittsfield Township.
But not for long.
Sentenced in May 2013 to serve up to 20 years on racketeering charges, Lorraine Brown, now 55, will be paroled sometime this week, according to the Michigan Department of Corrections, after serving her 40-month minimum sentence. Brown will then be transferred to federal custody to serve the remainder of a 58-month federal sentence after pleading guilty to a single charge of conspiracy to commit mail and wire fraud.
Brown’s scheme netted $60 million between 2003 and 2006 for the parent company DocX, her Georgia-based document processing firm that forged more than 1 million foreclosure documents used by banks and attorneys to illegally turn homeowners homeless.
The parent firm, Lender Processing Services of Jacksonville, Florida, has paid millions in fines and settlements — including $800,000 to Michigan for attorneys’ fees and costs and another $1.7 million to the state as part of a 46-state $127 million settlement.
But none of Brown’s co-conspirators has been criminally charged. And despite civil actions and investigations into the same kind of document fraud routine in foreclosures across the country, few if any other individuals have faced jail time over “robo-signing” and foreclosure forgeries, according to a Los Angeles-based author and journalist who has reported extensively on foreclosure.
“Her problem was that she lied to the FBI and the FBI didn’t take kindly to that,” says David Dayen. “She was the scapegoat.”
Dayen’s recent book, “Chain of Title,” traces the original discovery of the widespread document fraud and forgery that permeated foreclosures. The fraud became known as robo-signing, a process where documents required in foreclosures and other legal filings were signed and notarized with faked signatures, illegally back-dated or recreated with false information.
Brown allegedly directed her workers at DocX to routinely sign the name “Linda Green” on thousands of filings in Michigan and the nation with vastly different handwriting. The investigation into robo-signing began in April 2011, following an expose of DocX in a “60 Minutes” broadcast. In Michigan, complaints were lodged by several county clerks who found “Linda Green” documents in their files. The Attorney General’s Office found more than 1,000 fraudulent documents on file.
But additional reporting by Dayen for the website Vice reveals that robo-signing went far beyond DocX, Linda Green and Lorraine Brown.
Dayen reviewed more than 600 pages of documents from the FBI’s Jacksonville field office that detail a widespread investigation into robo-signing, foreclosure fraud and illegal activity in the creation of the mortgage-backed securities that spawned the housing bubble and foreclosure crisis. The documents reveal that FBI investigators and Justice Department attorneys impaneled a grand jury, deployed dozens of agents and forensic examiners, conducted 75 interviews, issued hundreds of subpoenas and reviewed millions of documents.
And then made just one criminal indictment — Lorraine Brown.
“If you look at these documents, this was a serious case,” Dayen says. “It ended up with one person being convicted, and it’s just unconscionable.”
In early 2012, several months before Brown pleaded guilty in both Michigan and federal court, 49 states, the District of Columbia and the federal government approved the National Mortgage Settlement with five major mortgage servicers. The $25 billion agreement was the largest consumer financial protection settlement in U.S. history.
In the settlement, the Justice Department reserved the right to bring criminal prosecutions. But no one was charged.
Since then, federal authorities have pursued other servicers and lenders for abusive practices, but only in civil cases. And despite repeated violations of banking and consumer laws by major lenders such as J.P. Morgan Chase and Bank of America, no executives at those firms have been charged.
In Michigan, Attorney General Bill Schuette’s spokeswoman said in a statement: “The Attorney General has charged many over mortgage modification scams including some that used fraudulent documents.”
None of those cases, however, focused solely on forgery and fraudulent documentation in foreclosures. The most recent case, for example, involved a Birmingham attorney who pleaded guilty to two felonies and 27 misdemeanors for stealing money from Michigan residents facing foreclosures or who sought help with credit card debt.
According to documents obtained by The Detroit News in 2013 under the Freedom of Information Act, Schuette’s office did investigate complaints of robo-signing at Orlans & Associates, a major foreclosure law firm headquartered in Troy in 2011. After an investigation in which a retired Michigan State crime lab expert reviewed six suspect foreclosure documents signed by a single Orlans attorney, the investigator ruled there was “a high degree of probability” the signatures were authentic, and the case was closed.
The federal Department of Justice didn’t respond to questions.
Mark Rosenblum, Brown’s defense attorney in her federal case, questions the motives of state and local prosecutors who indicted Brown after her federal charges were filed, including Schuette.
“She became the poster child for mortgage fraud,” says Rosenblum, who’s now a federal public defender in in Jacksonville. “Not only did she go to jail, but she was prosecuted in four different jurisdictions. How often does that happen? No often in my experience. Everybody wanted to get a piece of her.”
Brown last week rejected a Detroit News request for an interview.
Dayen, the author, concludes that the extent of fraud discovered by the FBI, in both foreclosures and in the creation of the trusts that held the mortgages for investors, was so widespread that federal authorities balked at going forward with more criminal charges, either out of fear it would further damage the financial system, which was teetering after the housing crash, or for other reasons.
At one point, he says, FBI investigators felt it could become one of the top 10 white-collar fraud cases in U.S. history.
“My judgment in dealing with this case is that the Justice Department didn’t want this getting out of control,” Dayen says. “They didn’t want to get into any major criminal issue because, if this was a systemic practice, if you continued up the line, you’re going to look at scores of major executives on Wall Street, and they weren’t willing to do that.
“The million-dollar question is: Why did it end there?”
Sometime next week, Brown will go from being prisoner number 867624 in the Michigan Department of Corrections and become prisoner number 57729-018 under the Federal Bureau of Prisons. Her 58-month sentence runs concurrently with Michigan’s, leaving her 18 months to go. Because most federal prisoners serve 85 percent of their sentence, Rosenblum says she could be released in as little as 11 months and could serve out that time in a variety of ways, including house arrest.
As for the fraudulent “Linda Green” documents created by Lorraine Brown, DocX and Lender Processing Services, they continue to circulate in county recorder offices and local courtrooms.
Says Dayen: “Every day in America, someone continues to be thrown out of their home based on a false document.”
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