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Mortgage Fraud: Local Officials Step Up To Uncover Document Fraud

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Local officials are conducting research on mortgage fraud in the absence of state and federal data.
Local officials are conducting research on mortgage fraud in the absence of state and federal data.

In the absence of state and federal research about how the nation's largest mortgage companies are forging mortgage documents and wrongfully foreclosing on borrowers, local officials are stepping up. Earlier this week, San Francisco assessor-recorder Phil Ting released a report concluding that 85 percent of nearly 400 audited foreclosures had serious problems or were outright illegal, providing a rare glimpse into the specifics of foreclosure fraud in America.

"We really wanted to take a look at what the documents would tell us and whether or not it was something systemic," Ting said. "We had a lot of anecdotal information but never knew if the problems represented 5 percent or 20 percent or 80 percent of the cases. What we have for the first time is hard data about the level of systematic problems going on in the mortgage industry."

Democratic Leader Nancy Pelosi (D-Calif.) called on U.S. Attorney General Eric Holder to follow up on the report's findings and launch an investigation to determine if federal laws were broken.

Five years into the country's unprecedented foreclosure crisis, hard data about the exact nature of the mortgage companies' abuses remains in short supply. Though federal officials insist they have investigated the problems, they haven't released their findings, leaving the public to piece together the situation from individual stories of struggling homeowners. Ting joins a very short list of local officials who are trying to fix that.

Last year, John O'Brien, the register of deeds for Massachusetts' Southern Essex District, released a report stating that of the 473 audited mortgage loans -- all of which were filed with his office in 2010 -- 83 percent included erroneous documentation that made it impossible to know which mortgage company owned the loan. The ownership data is key because only a loan's legal owner has the right to foreclose. More than 60 percent of the problem documents were fraudulent or included forged signatures.

So incensed was O'Brien with the findings that in June his office announced it would not accept paperwork from any person or company known to engage in document fraud. "We published a certified list of people known to have forged signatures or signed documents they knew weren’t truthful," said Kevin Harvey, first assistant register of deeds in the Southern Essex District office. "They'd come in and we'd tell them they can sign an affidavit attesting to the fact that they are who they say they are on these documents. Take a wild guess at how many affidavits have been signed. Zero! Zero!"

Jeff Thigpen, register of deeds for North Carolina's Guilford County, released similar data. His office conducted a study of 6,100 mortgage documents issued from January 2008 to December 2010. According to Thigpen, 74 percent had problems involving forged signatures and fraudulent documents. He has published on the office website a list of known offenders.

"When I looked at my data, I began to wonder if my land records office had become a warehouse of stolen property,” Thigpen said. “And the great big question mark is if this will come back to bite the homeowner. A lot of the borrowers are still in their homes. But what happens if they try to sell it at a later date or end up in foreclosure, and the paperwork is messed up. What happens then?"

Last week, the Obama administration and 49 state attorneys general announced a $25 billion settlement with five of the nation's largest banks over allegations that the companies committed document fraud and wrongfully foreclosed on homeowners. To arrive at the settlement, federal officials conducted more than 10,000 hours of research and poured through more than 2 million documents. Yet none of the findings have been released.

"Some documents related to the investigation will be made available upon the filing of a consent order in a federal court," said Derrick Plummer, a spokesman for the Department of Housing and Urban Development, one of the agencies that investigated the fraud and negotiated the settlement.

In the meantime, a handful of local officials continue to do their best to address a crisis that is nationwide.

"What's going on in Essex County, in San Francisco, in Guilford County are the same things going on all over the United States," Harvey said. "And part of the reason why we don't have more loan modifications for borrowers is because the banks don't know if they own that mortgage because the documents are messed up. It's all one big vicious circle. And until a major bank executive goes to jail over this, this will continue to occur all over the country."

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