Foreclosure Fraud: First Criminal Charges Filed In Nevada Over Robo-Signing

The Nevada attorney general has indicted two midlevel staffers at a mortgage document company, Lender Processing Services, on a whopping 606 counts of felony and gross misdemeanor for directing employees to forge signatures and falsely notarize documents used to illegally foreclose on Nevada homeowners.

Nevada's is the first criminal indictment since last year's discovery of the nationwide "robo-signing" scandal, in which mortgage servicing companies and banks were processing foreclosures en masse at lightning speed by signing documents they neglected to review and falsifying information.

"The grand jury found probable cause that there was a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder's Office between 2005 and 2008," said Nevada's chief deputy attorney general, John Kelleher, in a statement.

The indictment against the two employees, Gary Trafford and Gerri Sheppard, describes them as LPS title officers and California residents. Neither has been arrested, but the court has set bail at $500,000 each.

In a Thursday release, LPS said that it's cooperating with the investigation. It also asserted that no homeowners have been harmed: "Based on the company's reviews, LPS acknowledges the signing procedures on some of these documents were flawed; however, the company also believes these documents were properly authorized and their recording did not result in a wrongful foreclosure."

Prentiss Cox, a law professor at the University of Minnesota and a former assistant state attorney general, said it was admirable for Nevada Attorney General Catherine Cortez Masto to pursue the robo-signing case. But, he added, "When criminal prosecutions are done for robo-signing, I would hope the target of those prosecutions would be the people who designed the system and profited from it, not just the low-level people doing what they were told."

A spokeswoman for Masto declined to confirm or deny whether the attorney general's office is pursuing an investigation into higher-level LPS employees. As for the company's clients, Kelleher told American Banker, "We simply don't know if the major banks were aware of what these individuals were doing." Kelleher added that the state would consider future actions if it were to discover that banks had sanctioned robo-signing.

The Nevada indictments come as a coalition of state law enforcement officials and the Obama administration are pursuing a settlement with big banks over their role in robo-signing and other alleged mistreatment of struggling homeowners.

After the existence of robo-signing came to light in October 2010, attorneys general from all 50 states banded together with the federal government to punish five large financial institutions -- Bank of America, JPMorgan Chase, Citigroup, Wells Fargo and Ally Financial -- for mortgage-related misconduct, including robo-signing and failing to provide mortgage modifications to eligible homeowners. As it now stands, that punishment would take the form of a $25 billion civil settlement. The deal would reform the mortgage servicing industry and require banks to offer relief to homeowners in the form of modifications, principal write-downs and refinancing, among other options.

The negotiations, led by Iowa Attorney General Tom Miller, hit a snag this summer when several attorneys general -- most notably Eric Schneiderman of New York and Beau Biden of Delaware -- objected that the deal was too narrowly focused on robo-signing and mortgage servicing and that it would release banks from liability for too much potential wrongdoing. Schneiderman and Biden called for a more thorough investigation of how home loans were originated and sold to investors. In October, Biden sued MERS, a company that has served as big banks' private national mortgage registry, and Schneiderman subpoenaed the company.

Masto said on MSNBC earlier this month that she applauded Biden's MERS lawsuit. But, she added, "Some of us are attacking in different areas -- that doesn't necessarily mean we won't all get to the same litigation."

Geoff Greenwood, a spokesman for Miller, said the deal's terms would not preclude state law enforcers from pursuing criminal charges like the ones against Trafford and Sheppard. "We've made it very clear we are not negotiating criminal immunity, and states are free to file criminal cases," Greenwood said.

Comments

[wright4ulg]

08:57 PM on 01/04/2012

The banks might have already been paid back by several unidentified investors on your home loan, multiple times, and by credit default swaps and insurance! A potential insurance fraud! Then the taxpayer had to bailout AIG! Now they want the homeowner to pay them again!” .
If the chain of title is broken or you can prove that your loan was concurrently pledged to multiple Trusts, then essentially, I have heard that the borrowers will NO LONGER OWE ANY MONEY ON THE LOAN WHERE AN ASSET HAS BEEN SOLD TO MULTIPULE BENEFICIARIE. .
My name is John Wright AND I AM FIGHTING BACK!.
John's Daily Blog: http://piggybankblog.com/2011/12/30/break-in-chain-of-title/.
John Wright
Piggybankblog.com

[TerranceL]

02:10 AM on 12/01/2011

this is a good start for the government. Because of this the number of opportunistic people will be reduced and eventually might be gone already. there are already lot of houses with low mortgages and adding up those that were signed by thiese robo-signers, this might lead to over production of houses On what i have read from an article that in spite of intentions, Nevada AB 284 has yet to bring Las Vegas foreclosure real estate figures up to a reliable level. Empty houses litter the suburban scenery, yet several of the bargain-basement deals are being purchased. They're being bought by drug dealers and changed into marijuana “grow houses,” reports the Las Vegas Review-Journal. Many people are getting payday loans to pay for the homes.

[jims1950]

08:28 AM on 11/21/2011

WHY ARE THEY NOT ARRESTING THESE PEOPLE STARTING AT THE TOP OF EACH BANK?????

[DARK STAR]

07:50 AM on 11/21/2011

Do not let banks off the hook, period. They would not let you off, trust me.

[vonbek]

05:20 AM on 11/21/2011

So the mid-level lackies will do the time, while those on high will walk off scott free with billions in profits.

[CalSailor]

10:23 PM on 11/20/2011

I have a first step recommendation for solving the mortgage mess: All homeowners living in their primary residence will get an immediate rate reduction to 2% for first mortgages and 3% for second mortgages, retroactive to 1 Jan 2011. These mortgage rates will be in effect until 1 Jan 2015. At this time, all homeowners who have made their payments until then will be given a brand new first mortgage, at 4% APR, at the amount of the total of their current mortgages or at 95% of the valuation of the house, whichever is lower.

This would immediately stabilze the market, give homeowners certainty, and a significant payment reduction that would let them keep up much easier. Knowing they would get a new 1st mortgage on that date would give them an incentive to keep making payments, and it would help stabilize home values.

During the time this plan is in effect, the banks can be sorted out as to who has which percentage of the total home mortgage market; they would make new firsts reflective of the share in the market that they hold. This way, all banks would take an equal hit for the loans they underwrote, and we might get the flood of homes under foreclosure to slow, and this, in itself would help stabilize, and maybe slowly raise the home values.

Those who have had homes lost because of the mess can be dealt with in other ways.

PR Chris

[CalSailor]

10:05 PM on 11/20/2011

I would think, if you worked at one of the big banks processing mortgage loans you would start to recognize that some names/signatures were showing up relatively frequently on mortgage foreclosures. Given that bankers tend to have regions of responisibility, and types of loans, the people processing foreclosures for, say Bank of America, in Nevada might begin to notice they are seeing a LOT of documents signed by a few people...even assuming that the BofA officer got 100% of all documents that the individual in question processed, even THAT quantity might be suspicious. But again, how knows if the BofA or other large bank workers were encouraged to do more than shift papers from one group to another...

Pr Chris

[jdmccallum]

05:03 PM on 11/20/2011

Thin end of the wedge or scapegoats?

[monoloco]

12:26 AM on 11/20/2011

So has anyone found "Linda Green" yet? Are they even looking?

[cwaged1002]

03:25 PM on 11/19/2011

So typical of the American Justice system, arrest the powerless employees and negotiate a settlement with the executives, that do doubt will qualify as an expense deduction on their corp. tax returns lowering their taxable income.

[PCPrincess]

12:41 PM on 11/19/2011

Token arrests. Go for the top or lose all credibility. Nevada Attorney General: we are watching.

[jonbgoode]

12:08 PM on 11/19/2011

Used to start with the top and go down to the middle, but I guess now they start with the middle and forget the top. What will it stop and who will this help ?

[maxfax]

11:21 AM on 11/19/2011

"indicted two midlevel staffers at a mortgage document company, ..." I'm not impressed, where's the massive Wall Street CEO perp walk off the private jet-yacht?

[des946]

10:53 AM on 11/19/2011

The CEO and upper management are certainly responsible for over seeing the operation of the corporation, esp. in regard to 606 foreclosures. And does anyone REALLY think that two MIDDLE MANAGERS could or would process 606 foreclosures in this manner without "directions from corporate management, esp. with all of the bad publicity that has gone on in regard to the foreclosures? These "middle management" personnel may be guilty for their parts in all of this; but the CEO and uppermanagement are certainly more guilty than these minnions who carry out the corporate directives. Who is more guilty, the soldier who particiaptes in a mssacre because they are ordered to do so, or the general and officers who order the massacre to be conducted? This failure to indict the CEO and upperm anagement is a contrived cover up and "white wash" of those who are most culpable in all of this.

[AZreb]

08:34 AM on 11/19/2011

Reading the headline, I had hopes that the Department of Justice was prosecuting some of these people. Looks like the states have to do the work - good for Nevada! And good for the states' attorneys general who are going after the financial institutions that used fraudulent methods.