mortgage documents

Now any bank offering these as evidence is committing a fraud on the court and homeowner

Yesterday, I dashed off a post about the guilty plea taken by Lorraine Brown, the founder of DocX/LPS in which she admits that it was the custom and practice of her company to employ people to forge the signatures of others and to falsely notarize those signatures creating assignments, allonges and affidavits that were both forgeries and perjuries. In short, fraud.

At the end, I said that this could be a game changer. In the comments, folks thought that was a reference to the fact that for once we have a criminal case which involves a top tier executive. That is a big deal no doubt, but not the reason this could possibly change everything.

Homeowners who are being foreclosed upon based on a document chain that includes documents prepared by DocX/LPS have a built-in defense, and actually a counterclaim against Ms. Brown’s company. The defense is that the bank offering these documents as evidence no longer has any right to rely on them as proof of anything, and any bank offering a DocX or LPS document as evidence after yesterday knows or should know that they are committing a fraud on the court and on the homeowner.

Secondly, it would mean that the bank would be unable in many instances to prove an essential factual element of its case, that the mortgage and/or note was transferred to the foreclosing entity, and the matter would be ripe for a Summary Judgment motion by the defendant homeowner. This ONLY applies if there are DocX or LPS documents in your chain of transfer (just like the various MERS defenses only applied if your mortgage was put into the MERS system). Also, there may be other facts or circumstance in individual cases that would moot this point.

How can you tell if you have a DocX or LPS document in your case file? Well, many of the DocX papers I have seen helpfully have a DocX legend in the upper left hand corner. Also, look for documents executed in Alpharettta, Georgia and for LPS, in Florida.

About that counterclaim: In her plea agreement Ms. Brown agrees to make restitution to unspecified “victims” of her forgery scheme. Now, don’t get too happy thinking you are going to ever collect a judgment from her. She also agreed to forfeit millions of dollars, so I don’t expect she will have much left to pay any of you. However, if your counterclaim against Ms. Brown and DocX/LPS, they become parties to your lawsuit and you get to take discovery from them without the bother and expense of hiring private detectives to track down each individual robo signer whose name may appear in the bank’s papers.

While you will still need a process server to do the more expensive out-of-state service to implead her and her company, once that’s done, in many states you can do the rest by mail, up to the in-person deposition. Some states, like NYS, allow for deposition by written question, which can be done in the mail for the price of stamp.

As always, nothing above should be construed as giving you legal advice, this is NEWS and analysis. You should consult your own lawyer and the strategic impact of the above will vary depending on the unique facts of each individual case and the laws of the applicable jurisdiction.

So, while there is some tiny bit of satisfaction to think that maybe, just maybe, some MOTU who blew up the housing market is having just the smallest cold shiver down the spine hearing about actual criminal accountability for even one aspect of the incredibly reckless binge mail-and-wire fraud these mortgage originators and TBTF banks engaged in during the aughts, it’s not what really wows me about this development. I don’t care about the banksters nearly as much as I care about the millions of homeowners who saw their life savings, in the form of home equity destroyed. I care about the millions of other people who were victims of predatory lending and who relied on the bank to not give them a mortgage that they could not afford. After all who ever heard of a lender giving money to someone they knew could not pay it back?

I care that these victims of predatory lending now have a weapon. It will still take work and effort to wield it, it’s not going to be easy; but a profound weapon that if used skillfully can turn the tables in a foreclosure.

Want banks to make meaningful mortgage modifications with principal write downs? Well the specter of losing outright in court makes that kind of settlement much more tenable to the banks.

This could be the beginning of a revolution in foreclosure defenses, that’s the gamechanger.

Photo by FeatheredTar under Creative Commons license