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Unsealed court-settlement documents reveal
banks stole $trillions' worth of houses

Cory Doctorow
at 8:46 am Mon, Aug 12, 2013

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Back
in 2012, the major US banks settled a federal mortgage-fraud lawsuit for
$95,000,000. The suit was filed by Lynn Szymoniak, a white-collar fraud
specialist, whose own house had been fraudulently foreclosed-upon. When the feds
settled with the banks, the evidence detailing the scope of their fraud was
sealed, but as of last week, those
docs are unsealed, and Szymoniak is shouting them from the hills.
The banks precipitated the subprime crash by "securitizing" mortgages -- turning
mortgages into bonds that could be sold to people looking for investment income
-- and the securitization process involved transferring title for homes several
times over. This title-transfer has a formal legal procedure, and in the absence
of that procedure, no sale had taken place. See where this is going?

The banks screwed up the title transfers. A lot. They sold bonds backed by
houses they didn't own. When it came time to foreclose on those homes, they
realized that they didn't actually own them, and so they committed felony after
felony, forging the necessary documentation. They stole houses, by the
neighborhood-load, and got away with it. The $1B settlement sounded like a big
deal, back when the evidence was sealed. Now that Szymoniak's gotten it into the
public eye, it's clear that $1B was a tiny slap on the wrist: the banks stole
trillions of dollars' worth of houses from you and people like you, paid less
than one percent in fines, and got to keep the homes.

Now that it’s unsealed, Szymoniak, as the named plaintiff, can go forward
and prove the case. Along with her legal team (which includes the law firm of
Grant & Eisenhoffer, which has recovered more money under the False Claims
Act than any firm in the country), Szymoniak can pursue discovery and go to
trial against the rest of the named defendants, including HSBC, the Bank of
New York Mellon, Deutsche Bank and US Bank.

The expenses of the case, previously borne by the government, now are borne
by Szymoniak and her team, but the percentages of recovery funds are also
higher. “I’m really glad I was part of collecting this money for the
government, and I’m looking forward to going through discovery and collecting
the rest of it,” Szymoniak told Salon.

It’s good that the case remains active, because the $95 million settlement
was a pittance compared to the enormity of the crime. By the end of 2009,
private mortgage-backed securities trusts held one-third of all residential
mortgages in the U.S. That means that tens of millions of home mortgages worth
trillions of dollars have no legitimate underlying owner that can establish
the right to foreclose. This hasn’t stopped banks from foreclosing anyway with
false documents, and they are often successful, a testament to the breakdown
of law in the judicial system. But to this day, the resulting chaos in
disentangling ownership harms homeowners trying to sell these properties, as
well as those trying to purchase them. And it renders some properties
impossible to sell.

To this day, banks foreclose on borrowers using fraudulent mortgage
assignments, a legacy of failing to prosecute this conduct and instead letting
banks pay a fine to settle it. This disappoints Szymoniak, who told Salon the
owner of these loans is now essentially “whoever lies the most convincingly
and whoever gets the benefit of doubt from the judge.” Szymoniak used her
share of the settlement to start the Housing Justice Foundation, a non-profit
that attempts to raise awareness of the continuing corruption of the nation’s
courts and land title system.

Your
mortgage documents are fake! [David Dayen/Salon]

(Image: Foreclosure, a
Creative Commons Attribution (2.0)
image from andrewbain's photostream)

I write books. My latest
is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie
Stross); With a Little Help (short
stories); and The Great Big Beautiful
Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

MORE:  banks • banksters • Business • crime • finance • fraud • law • subprime

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