Chain of Title (35 page)

Bank of America misrepresented, both in communications with Nevada consumers and in documents they recorded and filed, that they had authority to foreclose upon consumers' homes as servicer for the trusts that held these mortgages. Defendants knew that they had never properly transferred these mortgages to those trusts, failing to deliver properly endorsed or assigned mortgage notes as required by the relevant legal contracts and state law. Because the trusts never became holders of these mortgages, Defendants lacked authority to collect or foreclose on their behalf and never should have represented they could.

Lynn's arguments helped to shape that language of securitization FAIL. Masto even quoted from
Kemp v. Countrywide
, where Bank of America executive Linda DeMartini admitted that mortgages never made it to the trusts. It wasn't just that Masto was suing over Bank of America's failure to honor a settlement, at a time when the Justice Department and other AGs wanted to clinch
another
settlement. Rather, her office understood the core issue, which many colleagues still regarded with bemusement. “These are not mere technicalities,” the complaint stated. “The PSAs spelled out a specific procedure in order to ensure a proper transfer.”

By September, investigators found repeated patterns in the Clark County recording office on notices of default, which inform Nevada homeowners that they face foreclosure. Two names kept showing up on the notices as representatives of multiple different banks: Gary Trafford and Gerri Sheppard. Prosecutors traced the documents to a Lender Processing Services branch office in Las Vegas. But Trafford and Sheppard actually worked in Orange County, California. The notary stamps came from Nevada, but the
individuals who purported to sign documents in the notary's presence lived one state over. Investigators pulled Trafford and Sheppard's driver's licenses from the California DMV, and the signatures didn't match the Clark County notices of default. Tens of thousands of documents appeared forged.

The strike force tracked down
employees from the Vegas LPS office, including Tracy Lawrence. Tracy entered the real estate business in her twenties with only a high school education. A month into her new job at what would become LPS (the company went through five different names during this period), her bosses asked her to become a notary. Actually, they strongly implied that her continued employment depended on her becoming a notary. So she filed an application and got a stamp.

Within a year Tracy became assistant title officer to Gary Trafford. The office processed notices of default for entities foreclosing in Clark County, including Bank of America, Washington Mutual, and Fannie Mae. Trafford had a system: Tracy would receive the documents, sign Gary's name, notarize in her own name, and send the notice to the recording office. When this began, there weren't many notices to forge, but after the bubble popped, the numbers grew to three hundred a week, every week, for five years.

Tracy said Trafford rarely visited Las Vegas. But there was his name, all over Clark County land records. Tracy forged Gary Trafford's name, and other employees forged Gerri Sheppard's. At some point Sheppard apparently recognized the fraud inherent in the workflow, but only tried to make the forgery less detectable. She told employees in an email: “
Regarding the signature of my name . . . please have someone other than the person that is notarizing it sign it. Thanks everyone—Gerri.” Tracy didn't want to be blamed for following orders, so she checked with her boss via email: “Per your instructions, I will continue treating our docs as I have all along, i.e. signing your name and notarizing myself. If there are any further changes, let me know.”
Trafford replied affirmatively. And like a good employee, Tracy did as she was told until getting laid off in 2010.

But when state investigator Todd Grosz stopped by her home a year later, she was given a choice: testify against Gary Trafford or face arrest. So Tracy, again following instructions, agreed to testify in exchange for leniency. Before the grand jury, she nonchalantly explained the institutionalized fraud that occurred at 500 North Rainbow Boulevard every day for five years. It sounded like any office in America: employees covering their
ass to avoid blame, stressed out by superiors squeezing more productivity from everyone. “Did you ever have any feelings that what you were doing may be illegal?” Kelleher questioned.

“
I didn't really think about it,” Tracy said. “They said, ‘Oh yeah, it's OK, you can sign our names.'” Submitting to authority was so ingrained in office culture, it never occurred to robo-signers to question the system.

Tracy Lawrence wasn't the mastermind behind the destruction of America's mortgage market, just a tiny pin in the Great Foreclosure Machine, a line worker. Even Gary Trafford and Gerri Sheppard were only slightly larger pins. But they represented a way to get to executives at LPS who authorized the forgery factory, and then the servicers who hired them. It was Criminal Justice 101: flip the small fry to get to the big fish. Kelleher was itching to indict a director at one of the major banks, and the strike force was deliberately climbing toward their target.

On November 16, 2011, a week after the grand jury wrapped testimony, Masto announced a criminal indictment against Trafford and Sheppard on
606 counts of signing documents without a notary present, offering false documents for recording, and abetting the false certification of those documents. Trafford and Sheppard pleaded not guilty, and LPS, while admitting that “
the signing procedures on some of these documents were flawed,” brushed it off, saying they were “properly authorized and their recording did not result in a wrongful foreclosure.” In other words, LPS admitted to the counts of the indictment but argued they should be overlooked because deadbeats didn't pay their mortgages.

Tracy was the only publicly named witness, and the only one with authorization in writing from her boss to forge his name. In exchange for her testimony, prosecutors reduced her charges to one misdemeanor for falsely notarizing a signature, which could lead to a $2,000 fine and one year in prison. Because she was a cooperative witness in a major fraud case, actual time served was expected to be far lower. Tracy faced sentencing on November 29. As Lisa and Lynn heard later, friends who talked to her the day before described her as upbeat, at peace with her decision, and ready to face the consequences. She talked about going back to college when it was all over.

On November 29, Tracy failed to show up for the hearing.
When police reached Tracy's apartment, they found her dead. She was forty-three.

John Kelleher rushed to the scene as medical personnel were removing Tracy's body. She had uningested pills still in her mouth. A drape was flung up over the valance atop the living room window. There were sixty bottles of pills on the kitchen table and a powdery substance on the carpet below the sink. To Kelleher, the scene looked staged. But detectives immediately ruled out homicide; they never tested the powder or the curtains. After an autopsy, the coroner listed the cause of death as suicide through intoxication, from Xanax and two antihistamines.

Nevada tried to salvage the case;
they had other notaries from the Vegas office who took the plea deal. The strike force even followed the script by
suing LPS for document fraud, going up the chain. But Tracy Lawrence's death was a huge blow, and a chilling signal for anyone thinking of turning on the Great Foreclosure Machine.

Lisa heard the news in a phone call from Helene Lester, who said, “I'm calling to tell you that you need to be very careful. Our witness died; they say it's suicide, but we don't think it is.” Lester gave Lynn the same warning. There was no way to know the truth. But to this day, Lisa and Lynn don't believe the official story. After Tracy's death, they shut their doors a little tighter and pulled their window shades down a little further.

After Kamala Harris backed out of settlement talks, everything went silent for a few months. By this time Lisa had sent packages of documents to the offices of thirty-odd attorneys general, but she rarely heard anything back. Calls with Laurence Tribe's Justice Department deputy unceremoniously ended. The Florida Department of Law Enforcement wouldn't respond. Other leads fizzled. Lynn wasn't even calling Jacksonville anymore. Michael, Lisa, and Lynn were stuck on an island, having proven a far-reaching fraudulent scheme but unaware of how that proof was being used. They had allies—some registers of deeds, scattered judges willing to invalidate foreclosures, and a couple of journalists exposing it all. But they had no vantage point on the endgame, no way to impact the process. They always talked about giving their information to someone in power to generate a reasonable solution. But what if that solution wasn't reasonable?

All the foreclosure fighters could do was fill the Internet with truth and give comfort and resources to homeowners. They could highlight the horror stories (“
Sharon Bullington may lose her home because she paid her
mortgage a week early”) and call out the shenanigans. They could cheer heroes and jeer villains. They could hold happy hours; Tim Miller, a musician who wrote a song about foreclosures called “
Love, Your Broken Home,” gave a live performance at one.

That fall, state organizations under the umbrella Campaign for a Fair Settlement began to flood the inboxes of reporters and state and federal law enforcement with nearly identical talking points. “
It is premature to sign an agreement before there is a full investigation into the foreclosure crisis,” claimed Nevadans for a Fair Settlement. “We cannot accept a settlement without a full investigation,” Pennsylvanians for a Fair Settlement agreed. It seemed like a spin-off of Californians for a Fair Settlement, which dislodged Harris from the fifty-state talks. But something was off about it. Why did they assume a settlement, with the only question being whether that settlement was fair? What investigation were they referring to? What happened to sending perpetrators to jail? Other than Catherine Cortez Masto, nobody seemed to be making the leap from robo-signing and document fraud to implicate the banks that authorized it. A settlement would break the path up the chain, tossing aside a mountain of documentary evidence. The mortgage industry didn't create phony documents because it was quicker but because they had no other alternative.

On December 1, 2011, Massachusetts attorney general Martha Coakley filed the kind of lawsuit activists wanted. She sued five big banks—Bank of America, JPMorgan Chase, Citi, Wells Fargo, and GMAC—for “
conducting foreclosures when the defendants lacked the right to do so.” This lawsuit effectively accused banks of stealing homes. Because of the
Ibanez
case, Massachusetts had the legal basis for charges about improper proof of mortgage ownership. But JPMorgan Chase's reaction to the Coakley lawsuit was ominous: “
We are disappointed that Massachusetts would take this action now when negotiations are ongoing with the attorneys general and the federal government on a broader settlement that could bring immediate relief to Massachusetts borrowers rather than years of contested legal proceedings.” Chase floated the prospect of quick homeowner aid to try to shut down a comprehensive inquiry into their practices. They sounded exactly like the White House officials pressing for a global settlement.

After New Year's, Lisa and Lynn had something new to worry about. The inspector general for Florida's chief financial officer
released his report
about the firing of June Clarkson and Theresa Edwards. It not only absolved Pam Bondi and her underlings of wrongdoing but also gratuitously accused June and Theresa of gross misconduct. They had “messy desks” and sloppy case files, which was true, mainly because the public delivered millions of mortgage documents and they had no legal secretaries to handle them.
They were unprofessional, Economic Crimes unit director Richard Lawson told the inspector general, citing a letter from a corporate lobbyist complaining of aggressive treatment. They spun wild theories about mass fraud without evidence, even though these theories were confirmed by Florida court rulings. They threw around terms like “forgery” in their PowerPoint presentation, in contrast to how Lender Processing Services claimed to have internal “surrogate signing” policies whereby individuals would delegate signing authority. Why LPS internal policy mattered more than state law was unclear. Lawson accepted the opinions of investigation targets and their corporate lawyers over his own prosecutors.

According to the report, Lisa and Lynn leveraged their personal relationships with June and Theresa to dictate the investigations (“[Clarkson] was just listening to Lisa Epstein and following her instructions”). The foreclosure fighters had no opportunity to rebut this because they were never interviewed. Lisa, described as “a blogger who is being foreclosed on,” was in Lawson's view using the Economic Crimes office to “extort a better result out of her own foreclosure case.” The “last straw” was June and Theresa leaking a confidential multistate draft subpoena against LPS to Lisa. But Lisa made a public records request for that document and never published it or circulated it to the media, though the report claimed otherwise.

It was the only day since getting her foreclosure notice that Lisa felt afraid. She had no relationship with June and Theresa except as a source of publicly available documents. She certainly had no power to force them to do her bidding. Yet in an official report that she requested, the state smeared her as a conniving deadbeat looking for a free home. Not only did it legitimize the fraud, but no whistleblower would ever approach the state with information again. That week Lisa's hair came out in clumps from the stress.

Lynn had a greater disrespect for authority than Lisa and took the report in stride. But she found criticisms of the PowerPoint presentation ridiculous. The allegedly “sensitive” documents in there were on Lynn's website for a year. Assistant attorney general Trish Conners gave the same
presentation to the Florida Senate. When Lisa met with Conners and Richard Lawson at the 2011 Rally in Tally, Conners personally thanked Lisa and other “citizen whistleblowers” for their work. Yet in the report, Conners seemed to develop amnesia: she “
may have used a couple of slides” from the presentation but couldn't remember which.