Several recent reports about robo-signers have brought fresh attention to another angle of the foreclosure scandal: Robo-signing didn’t just occur in the foreclosure process. It also occurred in the processing of mortgage assignments. Mortgage assignments are documents showing a loan’s transfer of ownership—transfers that happened over and over when Wall Street firms began buying, bundling, and securitizing these bundles to sell to investors. That’s why assignments are key to establishing who has the right to foreclose.
In videotaped depositions taken and uploaded earlier this month, employees at Florida-based Nationwide Title Clearing testified to signing thousands of documents each day, often as executives of other companies. And sometimes the signing itself really was automated. One employee, Bryan Bly, testified that his signature would be added electronically to documents that he’d never even seen. (Huffington Post pulled together several clips from the taped depositions, and you can watch them here.)
An official from Nationwide Title told Bloomberg News that producing electronic signatures in bulk is common in the industry, and that “the laws are still catching up” with this documentation practice. (Legal aid attorney Gloria Einstein, however, told Bloomberg the problem isn’t that the signature is electronic—it’s that “nobody is responsible for the information and the decisions.”)
Nationwide Title Clearing, much like Lender Processing Services, processes mortgage assignments—documentation transferring ownership of a loan when a mortgage is sold. They’re sometimes handled in-house by servicers but may also be contracted out to companies like Nationwide Title, which claims to be the largest third-party processor of mortgage assignments.
To speed the process, banks often authorized employees at processing companies to sign on their behalf using executive-sounding titles—never mind that the workers weren’t bank employees. (This much isn’t new—employees at LPS did the same thing when the company was still executing affidavits. LPS stopped executing affidavits in 2008, but still does mortgage assignments.)
Bly testified that he may have signed using the title of “Vice President” for as many as 20 different banks. He also testified that he signed off on about 5,000 of these mortgage assignments each day, but when asked by lawyers what a mortgage assignment is, he answered, “I’m really not sure,” the St. Petersburg Times reported on Friday. (A press release from the company quoted Bly saying later that he “of course” knows what a mortgage assignment is, and simply got flustered when questioned on camera by multiple lawyers.)
Improper mortgage assignments or transfers of loan ownership are separate from the affidavits improperly processed by the robo-signers who sparked the scandal, but they are “the largest and most complex harm that may exist with loans in default or foreclosure today,” according to Katherine Porter [PDF], a University of Iowa law professor and expert on mortgage servicers.
Bloomberg has more on why these documents cause major problems for banks and investors when they go missing or are executed improperly (For more, you can also reference this primer by CNBC):
Assignments, which are usually recorded with county land record departments, list the buyer and seller of a loan as it’s sold or packaged with other loans into a mortgage-backed security. Lawyers for homeowners are challenging the legitimacy of the documents, which are relied on by lenders to show they have the right to foreclose.
This afternoon, the Senate Banking Committee will hold a hearing to investigate improper or fraudulent servicing and foreclosure processing.
Another hearing scheduled for Thursday before a subcommittee of the House Financial Services committee will focus on robo-signing and the proper transfer of title.
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