USDOJ Protects Banks at Homeowners’ Expense in Robo-Signing Deal

When the top executive at a company called DocX pleaded guilty earlier this month to federal charges relating to fraudulent “robo-signing” tactics, it seemed there might at last be relief for millions of underwater homeowners. writinghand.jpg

Our Miami foreclosure lawyers know that when Lorraine Brown, 56, of Georgia, agreed to plead guilty in Florida forging and fraudulently notarizing more than a million mortgage documents across the country, many pundits clamored that this would be a built-in defense for those homeowners who were impacted by the scheme. In fact, there was a great deal of excitement about what this could mean for those whose mortgage documents were prepared by this company.

The reasoning went like this:

Homeowners who were facing foreclosure on the basis of a document chain that included records prepared by DocX/LPS could claim in court that the bank could no longer rely on the validity of those documents to prove bank ownership of the property. Any bank that attempted to offer up DocX records as evidence in a foreclosure proceeding should know that they are, in effect, committing fraud not only on the homeowner, but the court as well.

Because the banks would, in many instances, be unable to prove an essential element of the case, i.e., that the note and/or mortgage was in fact transferred to the foreclosing entity, many of these cases would must likely end in Summary Judgments in favor of the defense/homeowner.

Of course, this would only apply if DocX was somehow involved in the processing of mortgage records when you bought your home. Still, this would be more than a million people, and it would set a great precedent moving forward. After all, this was the first successful criminal prosecution of a top-tier executive in the whole robo-signing debacle.

Unfortunately, however, it’s not going to be that simple.

In the course of wrangling this plea deal, the U.S. Department of Justice, run by the Obama Administration, made a quiet – yet very intentional – move to wash the hands of the banks of this whole mess entirely.

The federal plea deal in fact holds mortgage services HARMLESS for their role in this scheme.

In the “factual basis” portion of the plea deal, the government holds that Brown told clients that the company had quality control measures in place that were “robust” and that would guarantee a proper and thorough signing, recording and notorization process. This is why the banks hired her, the government says. However, unbeknownst to the clients, those held as “authorized signers” at DocX in fact were not.

So in effect, the government is holding that the banks and servicers were victims, just as homeowners were.

Of course, this doesn’t make any sense.You have the some of the largest banks in the world – with their wealth of technology and resources – and you’re telling us that they were simply duped by this little company based in Georgia? A company that was responsible for preparing documents in deals that were collectively worth hundreds of millions of dollars?

While it’s true that some of these banks may not have had direct knowledge of the exact mechanics of Brown’s fraud, that was only because they wanted to have the protection of plausible deniability. However, to suggest that they had no idea whatsoever that this was happening is ludicrous, especially when you consider the volume of records she and her company were churning out.

The Justice Department should be ashamed.

And you should get a lawyer who is familiar with this flawed system, and who can help you navigate it while aggressively defending your rights.

If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.

Additional Resources:
Guilty Plea Comes in ‘Robo-Signing’ Scandal, Nov. 20, 2012, By Nick Timiraos, The Wall Street Journal
More Blog Entries:
Foreclosure Watch: “Worst” Robo-Signing Company Exec Pleads Guilty, Nov. 21, 2012, Miami Foreclosure Lawyer Blog