Lawmakers call for hearings into “robo-signing” cases.

By PALLAVI GOGOI and MICHELLE CONLIN

NEW YORK — Lawmakers and enforcement agencies called for hearings and further investigation last week after learning that the illegal practice known as “robo-signing” has continued in the mortgage industry.
County officials in at least three states — Massachusetts, North Carolina and Michigan — say they have received thousands of mortgage documents with questionable signatures since last fall. That’s when forged signatures and false affidavits — also called robo-signing — led to a temporary halt to foreclosures.
Banks and mortgage processors promised to stop the practice. But the findings of the county officials indicate that robo-signing remains a widespread problem.

Sen. Sherrod Brown, D-Ohio., chair of the Financial Institutions and Consumer Protection Subcommittee, said the panel will hold a hearing on robo-signing.

“Wall Street and some in Washington want us to believe that robo-signing is a thing of the past,” Brown said. “But the same risky practices that put our economy on the brink of collapse continue to infect the housing market.”

Rep. Maxine Waters, D-Calif., a senior member of the House Committee on Financial Services, said the lenders who continue the practice “need to be investigated and prosecuted.”

She said that regulators should step in and that the absence of stronger regulation is “the reason why the system broke down in the first place.” She said the county officials’ findings show lenders will not stop practices such as robo-signing on their own.

“(The lenders) have complete disregard for the damage they have already caused and have no intention of changing their ways,” said Waters, who also called for more hearings on the issue.

County officials who are responsible for keeping land records, including property deeds, say they have received thousands of robo-signed documents since October.

In Essex County, Mass., the office that handles property deeds has received almost 1,300 documents since October with the signature of “Linda Green,” but in 22 different handwriting styles and with many different titles.

In Guilford County, N.C., the office that records deeds says it received 456 documents with suspect signatures from Oct. 1, 2010, through June 30.

In Michigan, a fraud investigator who works on behalf of homeowners says he has uncovered documents filed this year bearing the purported signature of Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates.

OCC’s responsibility

Tuesday, an official from the office of Minnesota attorney general, Lori Swanson, contacted Essex County’s John O’Brien to get more information for its investigation into robo-signing. The Massachusetts Attorney General’s Office also confirmed that it is meeting with several of the state’s 21 registers of deeds to assess the extent of robo-signing.

Also Tuesday, nine recorders of deeds in Illinois held a news conference to say they will assist the state’s attorney general, Lisa Madigan, who is investigating robo-signing.

Waters, meanwhile, says the Office of the Comptroller of the Currency, or the OCC, is the main federal regulator for banks. As such, it’s the OCC’s responsibility to investigate the banks.

The OCC has been criticized by lawmakers and consumer advocates for going easy on banks. The same criticism resurfaced since the robo-signing scandal broke in September. Last fall, it was found that robo-signed documents led to banks wrongfully foreclosing on people who had paid their mortgages in full. When asked about the issue, an OCC spokesman denied any such thing had occurred.

The OCC partnered with other federal regulators and conducted a review of bank procedures, including robo-signing, in December. In April, the 14 largest national banks entered into a consent decree with the OCC in which they vowed to submit plans as to how they would address such systemic issues as robo-signing.

Last week, the banks delivered those plans to the OCC, which is reviewing them, a spokesman said.

Paperwork avalanche

The nation’s foreclosure machine almost came to a standstill when the nation’s largest banks suspended foreclosures last fall.

Part of the problem, banks contended, was that foreclosures became so rampant in 2009 and 2010 that they were overwhelmed with paperwork.

The banks reviewed thousands of foreclosure filings, and where they found problems, they submitted new paperwork to courts handling the cases, with signatures they said were valid. The banks slowly started to resume foreclosures this winter and spring.

The 14 biggest U.S. banks reached a settlement with federal regulators in April in which they promised to clean up their mistakes and pay restitution to homeowners who had been wrongly foreclosed upon.

The full amount of the settlement has not been determined. But it will not involve independent mortgage-processing firms, the companies that some banks use to handle and file paperwork for mortgages.

No individuals, lenders or paperwork processors have been charged with a crime over the robo-signed signatures found on documents last year. Critics such as April Charney, a Florida homeowner and defense lawyer, called the settlement a farce because no punishment was meted out, making it easy for lenders and mortgage processors to continue robo-signing.

Variety of practices

Robo-signing refers to a variety of practices. It can mean a qualified executive in the mortgage industry signs a mortgage affidavit document without verifying the information. It can mean someone forges an executive’s signature, or a lower-level employee signs his or her own name with a fake title. It also can mean failing to comply with notary procedures.

In all of these cases, robo-signing involves people signing documents and swearing to their accuracy without verifying any of the information.

Most of the tainted mortgage documents in question last fall were related to homes in foreclosure.

But much of the suspect paperwork that has been filed since then is for refinancing or for new purchases by people who are in good standing in the eyes of the bank. In addition, foreclosures are down 30 percent this year from last. Home sales have also fallen. So the new suspect documents come at a time much less paperwork is streaming through the nation’s mortgage machinery.

None of the almost 1,300 suspect Linda Green-signed documents from O’Brien’s office, for example, involve foreclosures.

Jeff Thigpen, the register of deeds in North Carolina’s Guilford County, says fewer than 40 of the 456 suspect documents filed to his office since October involved foreclosures.