One of the country’s largest banks designed a specific, formal process for falsifying paperwork when its foreclosure efforts were impeded by missing documents, according to documents filed in a New York court last week.
Wells Fargo created a manual for its foreclosure attorneys that included instructions on “a procedure for processing [mortgage] notes without endorsements and obtaining endorsements and allonges,” the filing alleges. Those bits of jargon refer to legal documents. When the bank was attempting to foreclose on a homeowner but lacked the documents it needed to prove to a judge that the action was proper, this manual allegedly showed its employees how to fudge paperwork to fill the hole in the bank’s case.
That means that the largest mortgage servicing company in the country was instructing attorneys to gin up signed legal documents. Foreclosure law sets strict rules around such documents, most of which must be completed within three months from when a deal to transfer a mortgage between financial firms is completed. Last week’s filing says Wells Fargo violated those rules not just on an informal case-by-case basis but through a specific, documented, broadly applicable one. Such a procedure would help to explain what homeowners’ attorneys call “ta-da” foreclosures, where a homeowner challenges a foreclosure on the grounds that documents are missing only to have those exact pieces of paper show up suddenly as if by magic.
The bank denies that it ever improperly endorsed mortgage paperwork and that its “foreclosure processes — today and back in 2012 — are legal [and] appropriate.” But copies of the attorneys’ manual referenced in the court filings have been obtained providing step-by-step instructions on how to proceed when documents required for a given foreclosure are blank or missing.
Throughout the years-long foreclosure crisis that followed the housing market collapse, homeowner advocates and bank watchdogs have warned that banks were taking families’ homes using flawed, incomplete, and nonexistent documents. Falsified documents were at the core of the so-called “robosigning” scandal that lead to an ineffective and often exaggerated settlement with five large mortgage servicers, including Wells Fargo. More than $1.4 trillion worth of mortgage-backed securities are based on forged and otherwise invalid documents, leaving the associated home loans in a legal grey area.
Millions of other foreclosures are believed to have been based on incomplete documentation, thanks in large part to the craze for packaging loans up and selling them off to other firms during the pre-crisis housing finance bubble. Those rapid sales and re-sales of mortgages from one company to another to a third lead to millions of mortgage transfers that lack the proper paperwork and are therefore legally unenforceable. Brokers and traders made money based on the volume of transactions they completed rather than on the quality of their work, and as a result millions of foreclosures have been conducted illegally.
Considering the vast evidence that mortgage servicers routinely break the rules and lie to homeowners, it’s not hard to imagine that Wells Fargo could have actually written down a guide to foreclosing unlawfully. What is startling is that the banks are finding new ways to profit even further from the foreclosure crisis. Wall Street is buying up the houses they’ve kicked people out of and turning them into rental properties and plans to apply the same sorts of wheeler-dealer money-making strategies to their new rental housing empire that they used with home loans prior to the financial crisis.