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Actually, Rose Cipollone doesn’t hold anything anymore; she died in 1994, of lung cancer. But before she died, she did something unique for her time. She sued tobacco companies for negligence and product liability. The most important thing was, she won.
The discovery portion of that case, when the parties get see the documents belonging to the other party and to take deposition testimony, drew back the curtain on the lengths to which the tobacco industry had gone to fool smokers into thinking that smoking was safe and to conceal how physically addictive they were. She was the first to win such a suit, and her widowed husband was awarded the modest sum of $400,000.
Her success in discovery led to many more individual suits being brought, even before it was clear that she would win. When a case in California brought a $51 million recovery, the whole ball game changed. The ugly truths unearthed in those cases, and the consistent successes on the merits, ultimately led a whole sheep herd full of State Attorney Generals to jump on the bandwagon. Ultimately, 46 states participated in a Master Settlement Agreement with the tobacco industry to compensate for increased health care costs and violations of consumer protection statutes.
This is the road map for solving the foreclosure crisis. The banks could have solved this on their own by engaging in real mortgage modifications, including write down of principal to bring underwater mortgages even with current housing prices, but they didn’t. The federal government could have solved this with cramdown or with a real HAMP, including a tribunal that homeowners could appeal to if the banks didn’t do it correctly, rather than the fake program they gave us. . . .
So, it will now fall to individual brave litigants to blaze the trail for governments, once again, to follow. Let me make this clear, in addition to the successes that some homeowners have had getting their foreclosure cases thrown out, things won’t really change until courts start awarding punitive damages.
We’ve had one case where a mortgage was cancelled because the bank refused to negotiate in good faith, that’s the leading edge. Pretty soon, smart lawyers are going to start realizing that these robo signed a/k/a forged and perjurious documents mean more than just a lack of proof on the bank’s part.
Forged and perjurious evidence is a fraud on the defendants, and secondary lien holders, and on the courts. Pretty soon, some smart lawyers are going to start amending their answers to include counterclaims for punitive damages. And when judges start awarding punitive damages in the hundreds of thousands or even millions of dollars, watch things change fast.
I was a bit player doing document review in the tobacco litigations, but I continued to watch them unfold even after I had moved on to areas of law that held more interest for me. How that widespread fraud on the public played out, is the template for how this widespread fraud on the public could play out.
Cue caterwauling about the evil trial lawyers in 1, 2, 3……. .
[More investigative reporting on mortgage issues and foreclosures on the Firedoglake Foreclosure Fraud Page]
22 Comments
I agree that discovery may yield real results but it is not easy getting there. And while I love the ideal of one individual litigant taking on the Banks it is easier said than done.
Banks will not easily turn over the documents needed. The objections raised are fifteen pages long. Good luck getting a retired judge who is sitting there for the pleasure of collecting $300.00 an hour, to wade through the legal arguments on why documents should and should not be produced.
Clients that are having a hard time feeding their households will have an especially hard time paying for the expenses of setting up depositions of robo signers three states away from the case.
In Florida, the Supreme’s have washed their hands of the problem, and the Florida Bar and rejected at the polls AG Bill McCollum are not likely to step in either. The band will continue to play on as individual homeowners are worn down. Where is the calvary??
Keep up the good work, Cynthia.
To add to what your saying, the problem is that in many states there is what’s called a “germane counterclaim” rule (or something similarly named), often limited to foreclosure actions. The idea when this kind of rule (a procedural rule) was imposed back in the late 80s during the S&L debacle (and the heyday o lender liability) was to limit the kinds of counterclaims people being foreclosed out of their houses (or other properties) could bring. Many states’ courts had previously required parties to bring all their disputes before the court in one proceeding, rather than fragment them into different suits. The germane counterclaim rule was an exception. Both rules were couched as “efficiency” measure, though for different reasons.
The “germane counterclaim” rule was supposed to prevent people from raising “frivolous” counterclaims against a foreclosure. The late 80s, you’ll also recall, were the heyday of so-called lender liability cases, a line of the law which became one of many bogeymen railed against from the editorial page of the WSJ and other business-friendly outlets. Raising such counterclaims was guaranteed to tie up a foreclosure for a long time while the motivations of the banks and bankers got a thorough going-over. So, a germane counterclaim rule sliced the lender liability claims out and put them in a separate action. That was enough until case law developed which basically made the lender liability cause of action a derelict on the waters of the law.
The way I look at the foreclosure cases in which document fraud appears to be present, I see them as fertile ground for civil RICO cases. I say that because two of the leading predicate acts for a civil RICO are wire fraud and mail fraud, and the fraudulent documents we’re dealing with in the foreclosure cases are sent via mail and/or wire. The problems with bringing the civil RICO cause of action are several, not the least of which are the heightening difficulties of pleading and proof which keep getting imposed by the Supreme Court (usually in favor of corporate defendants, but rarely in favor of individual gangstas). But, the corresponding attractiveness of the civil RICO cause of action is that it is available in both state and federal court – concurrent jurisdiction. And, there is also a state-law analog to RICO in many states. And, it allows (in some circumstances) dragging in the lawyers and oher professionals (if there is some proof to tie them into the pattern of racketeering activity), cutting them out of the foreclosure litigation b/c of their becoming conflicted by being a party, too.
That’s the next step, as I see it.
Great investigative reporting – thanks Cynthia.
Recommended.
“And, there is also a state-law analog to RICO in many states. And, it allows (in some circumstances) dragging in the lawyers and oher professionals (if there is some proof to tie them into the pattern of racketeering activity), cutting them out of the foreclosure litigation b/c of their becoming conflicted by being a party, too.”
To me dragging in the lawyers and the firms is a strong possibility. You have firm lawyers posing as VPs of interested parties (MERS) for the assignments of the mortgages to the foreclosing banks. That definitely shows a deliberate pattern of deceit. You cannot pretend to be an actor for one party (MERS) and be the attorney for the other party (the foreclosing plaintiff.) In addition, it was the firms who hired the document preparation actors which lead to the robo signers. When the heat is turned on the attorneys and firms, the banks will not have anyone to sign their fraudulent pleadings. At that time the court house doors should be barred.
You are right that suing the big banks is difficult. But, they will take notice if they get a million lawsuits. Litigation is expensive and a bank can run up $50,000 or more in litigation costs in no time at all. Cynthia is correct that when judgments start coming in on punitive damages the banks attention will be had. But, it only takes a few of these cases that when the discovery gets out there and accessible the prosection of the cases gets easier and less expensive for the plaintiffs. I say let the lawsuits begin. Sue the bastards.
Florida has a particular problem because of the Rocket Docket of retired judges who think their job is clear be backlog by granting foreclosures w/ listening to the defenses.
I hear you. I also know that a couple months ago a judge in Florida had two different banks try to foreclose on the exact same house on the basis of the exact same mortgage.
He reversed an earlier order in favor of the bank, and promised to let his fellow jurists know what had happened. I ‘m guessing that judge won’t make the same mistake again.
I will have more on the subject of the Florida problem in the next few days.
While you are correct on the letter of the law, in my experience civil RICO cases are usually not successful when brought by individuals. They really only seem to work when brought in conjunction with a criminal RICO (to get the forfeitures) or when brought by a State AG or US Attorney.
Not all states have the germane counterclaim rule, and even in those that do, you ca bring a separate action and use res judicata in the one action as a bludgeon in the other action
You are more than correct on Florida’s particular “problem,” but it’s not just the rocket dockets which are a pain in the a–. It’s all judges who don’t know the a– from their elbow on foreclosure.
Just came back from the courthouse after a call from a homeowner who following a judgment but before the sale, was locked out. An examination of the filings demonstrated real quick that fraud was throughout the file. An assignment of the mortgage was signed by a guy representing he was a vice president of MERS. The same guy signed an affidavit of amounts due stating he was a vice president of Bank of New York Mellon!! Nice work if you can get it. The same file showed that the note was in the name of another corporation and not endorsed at the time of the filing (meaning the Bank had no standing) and eight months later when they moved for judgment, the note is suddenly endorsed with an allonge that still was not payable to the Plaintiff.
BUT the kicker, it was not on a rocket docket or done before a retired judge. No this was done before a judge who came from family court and who had recently been assigned to mortgage foreclosures and hated it. These judges just do not want to do even easy lifting. The law is quite clear that the burden is on the Plaintiff to prove the cause even if the Defendant is mute. If the Plaintiff’s name is not on the note and the endorsements of the note and allonges are not made payable to the Plaintiff, how much easier can it get for a judge to tell the Plaintiff to pound sand.
I’ve got yet another example of the fraud and another name of possible robo signer (Hal Bartow where are you??) Just waiting for a judge or the courts to care.
Please please shine the spotlight on Florida. Our newspapers certainly are not.
We can only hope you’re right.
You’re a lawyer, right? Wouldn’t it be nice if some group decided to fund the lawsuit for a couple of plaintiffs that you could represent?
Or maybe some howeowner who’s getting screwed is fortunate enough to have a wealthy and pissed off relative who’ll pony up just to see the banksters take in the shorts.
It will happen. The right case + the right lawyer + the right judge = some huge punitive damage award, and then all hell is gonna break loose.
Just you watch
Hope you’re right. The fraud is becoming so obvious, isn’t it?
Blue Floridian: what happened to your case this morning, with the family court judge who didn’t want to be there? Did he throw the case out? Issue any orders to give your client the key? anything?
Consider the Sarbanes Oxley Act. It is relevant once you consider that lack of ownership of title induced systemic cover up by management. Think of this like Enron, not like product liability.
I’m sorry I did not write clearly enough. I received a call from someone who is not yet a client. I went and checked her pleadings and found the fraud already rubberstamped by the “family court” judge who hated foreclsoures. She’s back on the domestic side by the way.
Now if the potential client will hire me (big if even tho’ I try to be reasonable on fees,) I’ll prepare the necessary papers to set the judgment aside. All of these judgments are potentially voidable which will cause another batch of headaches.
The judge now presiding is a retired judge, who used to do evictions. He might have a heart for the homeowners but we will see. Hope I get hired because I’m dying to expose the fraud.
Blue and Cynthia: Is there any way FDL can organize a fund-raising appeal to finance this kind of suit? I’d kick in $100, maybe more later.
In Connnecticut an Appellate case recently held that even if the mortgage was not validly assigned to the plaintiff it didn’t matter because “the mortgage follows the note”. All the notes I’ve seen are endorsed in blank with the plaintiff claiming to be the holder. In simpler times the holder and owner were the same entity which I believe is the assumption behind the Uniform Commercial Code, but the Code says “holder” and that’s that. It doesn’t define the holder as necessarily being the holder.
Connecticut has a statute that requires business trusts (mortgage pools?) to register with the Secretary of State. The business trusts register with the SEC as a prelude to selling securities. The plaintiff claims the SEC filing preempts state law. It seems to me the SEC filing has nothing to do with the conditions for doing business in a state. Any thoughts?
Does state RICO provide, like federal RICO, for treble damages?
One issue that may be forgotten and is important in the foreclosure narrative: the servicers’ fraud. Many borrowers were forced into foreclosure by servicers’ intentional acts to churn fees for their own profit. This practice is ongoing and pervasive. There are probably hundreds of thousands of families who could still be paying their mortgages but for this practice, which often was done in such a way as to be kept hidden from the borrower until several months and thousands of dollars in late fees after the initial purposeful act that put them into arrears on their payments. Crediting payments first to cover the tacked-on fees, and then crediting what remained (if anything) to the mortgage assured yet more late fees, and made it impossible for many to ever get out of arrears, thus leading to foreclosure.
Many folks commenting on the foreclosure blogs are expressing disdain for those they see as deadbeats, and deserving foreclosure, and stating that since the bank has the right to foreclose, then it doesn’t matter so much that their paperwork is sloppy. But that misses the true narrative, which may be even worse than this. It may be that housing is so unimportant to the banks that they don’t even care if entire neighborhoods are destroyed, as long as they’ve made their killing, and that families were mere profit units, pawns to be discarded once the maximum cash has been extracted out of each one. The purpose of HAMP seems to have been a collusion with the banks in this exact scheme: to string them along to keep paying until they’re dead broke, so that the banks can ‘earn their way’ back to solvency and delay writing down their assets. We know that Treasury admitted to this.
Since the servicers are mostly subsidiaries of the big banks, one wonders what the benefit was to them of forcing families into foreclosure? Could it be that the big banks thought the bubble would never burst, and there would never be a reckoning, when their MERS racket would be found out? Could the lack of proper paperwork be as simple as merely cutting costs to the bone, in order to maximize profits, by shredding the wet-ink originals once scanned into MERS, thus saving storage and recording fees? Was the intent to churn housing by forcing foreclosures, in order to take ‘back’ homes that were supposed to keep rising in value, in order to resell them for more profit?
I have a lot of questions about the full depths of depravity of what’s going on. Maybe the speed-up of foreclosures is simply similar to a bank run, and the banks are trying to foreclose and resell as many homes as possible before the entire housing market grinds to a halt, or blows up. Whatever it is, it doesn’t seem likely that real estate will ever recover from this, and will never be again considered an investment, which may be for the good, as long as people once again have secure shelter.
Crossing my fingers that you get hired, BlueFla. Thanks for clarifying.
Can “jointly and severally liable” be invoked?
A great many of the people that bought homes from 2000 to 2007 can’t be helped. Some estimates from our government’s own figures are as high as a 1/3. These figures are backed up by a great deal of non governmental analysis. The problem is that up to a third of homebuyers from 2000 to 2007 are in homes that they cannot afford under any scenario. If the loan amount is reduced, if the interest rate is reduced, if both are reduced, it just doesn’t matter. A household with a total income of 50K can not afford a $300,000 home, ever. I would love to see the banks and mortgage lenders prosecuted for their greed but that is unlikely. They didn’t do anything that the government wasn’t allowing them to do. People must understand that this was a fraud of historical scope and that it was done with our government’s blessing. Legal revenge or accountability will not happen. We need a program to help people leave the homes they will never be able to afford to safe lower cost housing or rentals. Any delusional effort to keep those who can’t afford their homes in their homes will only result in housing getting worse.
There is a problem with using the tobacco analogy. Tobacco hurts everyone exposed to it. People who buy homes that they can afford do not hurt either themselves or those around them. People buying homes that they couldn’t afford hurts everyone.
Do they have the original wet ink signature of the note? Not a good quality color copy–the actual orginal?
The “poor people bought houses they could not afford” myth has been spun by the banking industry from day one. The vast majority of underwater mortgages these days are o houses with people with real incomes, who had equity and real downpayments, and could have qualified for conventional morgtgaes and were deliberitatly steered to ARMS and ALt- A mortgages.
Don’t let the banksters fool ya