Authors: David Dayen
Chain of Title (38 page)
Lisa got the news at her election night party, August 14, 2012, at Brogues Boomerang Bar in Lake Worth, an Irish pub owned by Australians. Sharon Bock won, 76 percent to 24 percent. But
Lisa was proud to have received 27,003 votes from people from all over the county who heard her message. In a short speech Lisa thanked campaign staff and volunteers, everyone who helped and supported her. She could barely conceal her excitement that the race was ending.
A couple of days after Election Day, Lisa was on the phone about some foreclosure-related issue, and Jenna tugged at her shirt. “Why are you still talking about foreclosure fraud, Mama? Sharon Bock won!” Lisa had to admit that Jenna was right. She was exhausted, not just from campaigning but from living on three hours of sleep a night for years. She sacrificed everythingâher job, her personal life, even motherhoodâfor this mission. It was time to pass the baton. She made the decision with serenity. She could answer that inner voice and finally say she was done.
As Lisa stepped away, Lynn sent in her check to Deutsche Bank, closing a chapter in her life, too. A year later, on July 22, 2013, Akerman Senterfitt finally executed an official release of mortgage lien, filing it with Sharon Bock at the office of the clerk of courts, Book 26197, Page 1091. Signing for Deutsche Bank National Trust Company, as trustee for the certificate holders of Soundview Home Loan Trust 2006-OPT2, was a vice president named Leticia Arias. Lynn smiled.
Leticia Arias was a known robo-signer.
On the alphabet streets in Lake Worth, houses are dotted with black mold. Others have buckled roofs, interiors gutted by fire, or stripped wiring. Pests and critters move in as people move out. Half the homes have busted windows, and No Trespassing/No Traspasar signs in English and Spanish are ubiquitous. “Those are to keep the drug sales out,” says my tour guide, Lynn Szymoniak. “I've been stopped doing these tours. Cops have told me, âYou're not supposed to be here.' ”
Lynn runs this circuit for journalists, filmmakers, or anyone interested in battered monuments to the foreclosure crisis; sometimes she drives by herself. She checks on that yellow Deutsche Bank house, the site of all those protests; it's still boarded up. Homes in this neighborhood went for $300,000 at the top of the bubble. Prices are now one-third of that, and some will never be sold again; Lake Worth recently got funds to bulldoze the worst of the worst. “You can find whole blocks gone here,” Lynn told me. “It's like a flu spread and everybody had to leave.”
Back at the Intracoastal Waterway, we reach the thirteenth-floor offices of Lynn's organization,
the Housing Justice Foundation. The same high-rise houses the local headquarters for
SunTrust, a regional bank that paid fines for robo-signing and servicing abuse in 2014, as well as local offices for the FBI. Lynn figures the FBI's presence makes it secure from break-ins. She has a spectacular view of downtown Palm Beach, but it's only twelve hundred square feet for four employees and all the files.
Lynn runs the foundation with her two sons, Zach and Mark Elliot, and Mark Elliot's wife, Rachael. They call it a research and education nonprofit,
dedicated to investigation and awareness of foreclosure fraud. Even after the settlements, there's plenty to be aware of, because every day in America, families get thrown out of their homes based on false documents. And no regulator, politician, public prosecutor, or federal judge manages to care. They've collectively decided to pretend the ruination of a three-hundred-year-old property records system never happened. Like the Amazing Mystico and the block of flats, everyone believes in the Great Foreclosure Machine again.
Exhibit A:
Brent Bentrim of Charleston, South Carolina, hit with foreclosure actions from multiple servicers since 2008, despite never missing a payment. Wachovia and then Wells Fargo repeatedly misapplied payments, illegally charged penalty-rate interest, force-placed insurance, and altered the principal balance. Wells Fargo filed a lost note affidavit, then found the “original” note, which showed a completely different bank as the lender, without a chain of title extending to Wells Fargo. Bentrim is still in court; the most recent docket item was March 2015, seven years from the initial filing.
Exhibit B: An email conversation accidentally filed in the case of
Abby Lopez, Lisa Epstein's former neighbor from Gazetta Way. In the email, LPS employee Nicolas Leonhard tells his supervisor that the plaintiff on the complaint, HSBC, doesn't match the name in their loan system, Bank of America. Instead of stopping the foreclosure, the supervisor tells Leonhard to simply deed the house over to Bank of America after the foreclosure sale to HSBC. Problem solved. Lawyers for HSBC tried to have the email records purged, but failed.
Exhibit C:
Phoenix Light v. JPMorgan Chase
, a 2013 case where investors surveyed the transfer history for 274 loans in JPMAC 2006-WMC4 mortgage-backed trusts, finding that none of the mortgages and notes were conveyed properly before the closing date, making the trust not backed by mortgages (securitization FAIL) and liable for a 100 percent penalty for violating REMIC tax status.
A 2012 case against Barclays Bank looked at three other securitizations, similarly discovering that 99 percent of the mortgages were either unassigned to the trusts or assigned improperly.
And so on.
Lynn was actually cited in the
Phoenix Light
case. At the Housing Justice Foundation, she showed me thousands of files in pull-out stacks, cross-referenced by bank and trust. More get added every day, projects
documenting bankrupt mortgage trusts and abandoned homes and phony note endorsements. If someone were doomed to an eternity of meticulously accounting unpunished crimes, the work product would resemble the contents of this room.
I got to see the famous poster boards, and two pictures of Lynn, one with President Obama and the other with Vice President Biden. During the 2012 election, she got to meet both of them, thanks to her lawyer and Democratic power player Dick Harpootlian. “This is the woman who sues the banks,” Harpootlian said, introducing Lynn to Biden. Lynn mentioned Biden's son Beau, the Delaware attorney general, and the vice president beamed, saying, “You know you're a success when your children are better people than you are.” Beau Biden died of brain cancer three years later.
Lynn paid her way into the Obama meeting, a small fund-raising lunch in Atlanta. The president, who told
60 Minutes
eight months after Lynn's appearance on that show that “
some of the least ethical behavior on Wall Street wasn't illegal,” greeted everyone in the room warmly. Lynn expressed her disappointments on the failure to prosecute. Obama, like all great politicians, said what Lynn wanted to hear, stressing the need for more principal reductions and an end to predatory mortgage practices. After the lunch, Atlanta mayor Kasim Reed thanked Lynn for asking her question, telling her about all his city's foreclosure problems. Lynn thought,
Well, why didn't you say anything?
In addition to research, the Housing Justice Foundation issues grants to organizations focused on foreclosures, from the Florida First Amendment Foundation to Occupy Our Homes, which sprouted nearly a dozen chapters focused on eviction defense. In 2013, with help from Lisa and Michael, Lynn convened a nationwide Occupy Our Homes conference at the foundation offices, empowering them with detailed information about fraud. Through direct action, Occupy Our Homes saved and continues to save hundreds of homeowners from eviction. They never reached a scale to truly pressure the banks, but they haven't relented.
Nearly every day, homeowners plead with Lynn for help, praising her like she was Mother Teresa. When she informs them there isn't much she can do, they conclude she's as bad as Jamie Dimon, JPMorgan Chase's CEO. Enduring a daily barrage of inchoate rage exposed Lynn to the depths of human desperation, and she started blaming herself for snuffing out people's
hope, closing off avenues of escape. The vitriol would have dimmed her view of human nature if it wasn't already pretty low.
The foundation's biggest project was the
qui tam
case, which didn't end with the $95 million federal settlement. That only involved the five leading mortgage servicers; Lynn sued thirteen other parties, from servicers to trustees to document manufacturers like Lender Processing Services. In August 2013 the case was unsealed, along with one remarkable document: a mortgage assignment dated February 9, 2009,
after
the foreclosure of the mortgage in question. Typed on the right-hand side of the assignment was this note: “
This Assignment of Mortgage was inadvertently not recorded prior to the Final Judgment of Foreclosure . . . but is now being recorded to clear title.” You could not find stronger evidence of a mass document production scheme to fabricate ownership.
Though the behavior of the five servicers in the settlement and the behavior of the remaining defendants were identical,
the Justice Department declined to intervene in the second half of the case, leaving Lynn and her lawyers to cover expenses. When the seal was lifted, Lynn discovered that all those confidential information disclosures, which she spent hundreds of hours crafting for DoJ, were never served to the banks to force disclosure of documents. All that drafting was just a D.C. smokescreen.
Lynn kept returning to federal court in Columbia, South Carolina, for
qui tam
hearings. She would hear whispers from prosecutors: “Why doesn't she just take her money and go home?” The banks drew out the case, resisting every discovery request, making frivolous arguments and abruptly dropping them, and bringing in dozens of lawyersâat least three for each bankâto argue each point separately. A lawyer for American Home Mortgage Servicing tried to explain away forgery by saying, “You know how it is sometimes when you're married, judge, and you sign your wife's name to a check. And sometimes she knows . . .” He paused dramatically, then concluded, “And sometimes she doesn't!” He sat down with a big grin on his face.
But no matter how many bank lawyers embarrassed themselves, they simply wore out the system. In spring 2014, in what felt like a bloodletting,
Judge Joseph Anderson threw out most of the case. Lynn trudged on for another year, filing appeals and motions out of some warped sense of duty to the truth. But she reached an undisclosed settlement on the lion's share of the claims on April Fool's Day 2015. On June 26,
Lynn kept alive a sliver
of the case, appealing to the Fourth Circuit on HUD claims against three trustees, two mortgage lenders, and LPS. If that fails, all that's left is the Supreme Court. But even if it succeeds, Lynn won't send Wall Street tumbling to the ground. She won't even make them hand back all their illegally gained profits.
One other case remains. On March 4, 2013, Damian Figueroa, the
Stop Foreclosure Fraud
blogger who was once Lynn's client, sued her for breach of fiduciary duty and unjust enrichment.
Damian said Lynn stole his research, to be used in a jointly filed
qui tam
case, and filed the suit on her own. And he submitted hundreds of emails between him and Lynn to prove it.
When I asked Lynn about this, she dismissed it as a lie. She did represent Damian in a class action suit against the David Stern law firm and MERS, as specified in the retainer. She actually disclosed to Damian, confirmed by his emails, that she had a False Claims Act case going, with her as the relator. Many of Lynn's articles describing fraud, along with her letters to regulators, predate ever meeting Damian. They collaborated later, but everybody was helping everybody research public documents. Lynn added that Damian congratulated her after learning of the settlement, and they even went to lunch together. He never said he was the “real relator.”
Damian, whose class action suits against the banks were all dismissed, declined to speak to me, on the advice of his lawyers. But in his complaint, he says he initiated talk of a
qui tam
on February 9, 2010, at the foreclosure happy hour where he and Lynn met. A week later, over email, Lynn did say she had a
qui tam
going, though she expected nothing to come of it. “But if you want to try this too, let me know and we will file together both knowing that this is a real long-shot,” Lynn's email added.
That line is the essence of Damian's argument.
For months they continued corresponding, with the
qui tam
offer never again made explicit. Lynn occasionally asked for research and Damian would supply it. At one point Damian found a list of LPS signers and shared it with Lynn. The names ended up in the complaint, though lists of robo-signers were also compiled elsewhere. After filing the
qui tam
, Lynn complied with the seal order by denying to Damian that she had her own case going. Lynn specifically says that Damian should consider a
qui tam
against the Stern law firm and IndyMac, who were never defendants in her case.
Damian wasn't the only one claiming that Lynn stole his work; people habitually called up the office with such charges. But nobody else acted on the impulse. The case remains in the courts, and Lynn thinks it'll just go on forever. You can parse the evidence on either side. But it's really a textbook example of what happens when movements falter. Before long everyone starts turning on each other, and the cause itself becomes secondary, making it easier for perpetrators to steal away into the dark.
Housing and Urban Development secretary Shaun Donovan insisted the National Mortgage Settlement would deliver principal reductions to one million struggling homeowners. In the end, according to reports filed by the settlement's oversight monitor,
just 83,000 homeowners received a first-lien principal reduction, over 90 percent fewer than promised. The banks issued almost exactly the $10 billion in principal reduction listed in the settlement as the minimum requirement.
Donovan touted over $50 billion in tangible benefits, but much of it came in the form of short sales, where homeowners sell their homes for below the mortgage balance, without having to make up the difference. Short sales can be helpful for families, but they represent the polar opposite of keeping people in their homes, the intended goal. Far more Americans lost homes in transactions via the National Mortgage Settlement than got principal reductions to save them.
Servicers received credit for “forgiving” debt already discharged in bankruptcy, for extinguishing second mortgages deemed uncollectible, and for modifying loans held by investors (paying for the settlement with other people's money). They satisfied their penalty by donating some homes to charity and bulldozing others, routine activities to establish community goodwill. And in perhaps the most devious maneuver, nearly one-quarter of the gross consumer relief value, $11 billion, came from short sales in “non-recourse” states like California, where lenders are prevented by law from seeking money from borrowers if the sale price comes in lower than the price of the mortgage. In other words,
this supposed “gift” to homeowners had no material value whatsoever.
Cash payouts for families illegally kicked out of their homes ended up as
an insulting $1,480, less than two months' rent. Oklahoma, the one state that didn't join the settlement,
set up a mortgage fund for foreclosure victims that granted over seven times as much cash per homeowner.
The other big settlement, the Independent Foreclosure Review from the Federal Reserve and the Office of the Comptroller of the Currency, was neither independent (banks hand-picked their own reviewers) nor an adequate review (whistleblowers alleged that reviewers deliberately minimized evidence of borrower harm). In the end, regulators aborted the mission, with
banks instead paying $3.6 billion in cash to all 4.2 million families put into foreclosure in 2009 and 2010, divided into broad and seemingly random categories. People approved for a loan modification who illegally lost their homes anyway got $300 for their trouble. Most homeowners received under $1,000; some were so insulted that they sent the checks back. Lisa Epstein got a check for $600.