Thursday, October 21, 2010

Fat Eddie's Pawn Shop and Foreclosure Mill*

Foreclosure Profiting Wall Street Equity Firms:

With a surge in lawsuits against law firms specializing in foreclosures, a case in Mississippi is casting light on another aspect of the mortgage mess — the connection between Wall Street private equity firms and those law firms, often known as foreclosure mills.

A review of public filings, company news releases and other public statements shows that several private equity firms or entities they control have stakes in the business operations of some of the busiest foreclosure law firms in New York, California, Connecticut, Florida, Georgia and Texas.

The influence, if any, that private investors are having on the practices of the foreclosure mills is not clear. But the issue is likely to be examined in coming months in lawsuits like the one in Mississippi and as a nationwide task force of state attorneys general start their inquiry into the accuracy of mortgage documents.

To maximize investment returns, private equity firms often squeeze down costs in the operations they acquire. And some legal experts suggest that could be a factor in the quality of legal documents generated by foreclosure mills.

Awesome. You had to figure that Big Banking and Big Mortgage couldn't be alone in the criminal racket of foreclosure: somewhere, somehow, you knew Wall Street would figure out how to get a piece of the action.

In other news, legal clashes continue to play out in courtrooms across the country.

Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007, according to court documents, analysts and interviews.

Now those missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights.

Not surprisingly, some sectors of academia (primarily economists) are being co-opted by Big Mortgage into defending lenders.

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

Snicker. Finance professors.

What the good professor Mason fails to realize is that many of the people being foreclosed on fraudulently have, indeed, been repaying their loans. That's why this is called fraud, and why it may end up going down as the biggest white-collar scheme ever perpetrated on the American public.

For example, the foreclosure business often got so busy at the Plantation, Fla., law offices of David J. Stern — and so many documents had to be signed so banks could evict people from their homes — that a supervisor sometimes was too tired to write her own name.

When that happened, Cheryl Samons, the supervisor at the firm, who typically signed about 1,000 documents a day, just let someone else sign for her, court papers show.

“Cheryl would give certain paralegals rights to sign her name, because most of the time she was very tired, exhausted from signing her name numerous times per day,” said Kelly Scott, a Stern employee, in a deposition that the Florida attorney general released on Monday. A lawyer representing the law firm said Ms. Samons would not comment.

No doubt she's somewhere soaking her "very tired, exhausted" hand in ice.

Meanwhile, as the foreclosure racket clanks back into motion, critics are beginning to make their points more cogently, none better than below (emphasis mine).

Some analysts are not sure that banks can proceed so freely. Katherine M. Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.

“The misbehavior is clear: they lied to the courts,” she said. “The fact that they are saying no one was harmed, they are missing the point. They did actual harm to the court system, to the rule of law. We don’t say, ‘You can perjure yourself on the stand because the jury will come to the right verdict anyway.’ That’s what they are saying.”
In other words, they've committed crimes; crimes for which imprisonment is justified.

And people have been harmed. Tens of thousands have been illegally evicted from their homes. I can't think of a more violent form of corporate crime than that.

*With all due attribution to Tom Tomorrow (click cartoon to enlarge).

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