Friday is usually a day for releasing news you don’t want anyone to notice. The Friday before the Super Bowl should be for news that you really want to be overlooked. So, it’s curious to me that both Illinois Attorney General Lisa Madigan and New York Attorney General Eric Schneiderman should both announce long awaited robosigning cases on that day.
Madigan’s civil lawsuit is against a document mill in Florida called NTC. This Complaint alleges on the one hand that NTC created false documents for use in foreclosures cases and bankruptcy cases, but on the other hand it lists among the types of relief requested that NTC go back and review and correct the forged paper work. This confuses me greatly. How do you correct a perjurious forgery? Does she mean “void the false assignment that purported to show that Mr. Jones’ mortgage was assigned into XYZ pool during the open REMIC period and replace that with an affidavit that correctly states that no one ever assigned the mortgage from the now defunct originator?” Yeah, that’s going to be fun to monitor for compliance.
Schneiderman’s civil lawsuit is against MERS and several Too Big To Fail Banks. I’ve read the Complaint and the allegations against MERS are damning. The banks get hardly a mention, and there is no specific overt act alleged against each particular bank, unless you count the somewhat unusual insertion of citations to a raft of cases where foreclosure courts and bankruptcy courts have found the documents to be fraudulent or at least unpersuasive.
A few things jump out at me. These are civil suits rather than criminal cases, but there is no explanation in either press release nor evident in the complaints to tell me why civil instead of criminal, and why not focus on conspiracy? Further, when you consider that people have been marching in the damn streets and “occupying” foreclosure sales, you’d think a couple of prosecutors who got their jobs via election would be holding big grandstanding press conferences on a day calculated to get them maximum press coverage. Instead, they release on take out the trash Friday.
David Dayen thinks that these two cases are all we’re going to get and these are “carve outs” in advance of Schneiderman and Madigan caving in and signing the 50 state deal. Shudder.
Yves Smith thinks that the Schneiderman suit is a signal that the settlement will allow the banks to meet their obligations by modifying mortgages held in trust for certificate holders who are not themselves banks. So, for example, if pension fund A bought a security issued by Bank B, and the trustee for the security pool is Bank C, and the servicer is Bank D. The banks can get credit towards that $25 billion in the settlement amount they’re supposed to commit to modifications by modifying the mortgages in that pool. This might be good for homeowners with those mortgates, though the details seem like HAMP/HARP only worse. But the banks are using the money of the pension fund to do it, not paying any of their own money.
Even more suspicious is the sudden rush of private law suits also filed last week. Hat tip to the fleet fingered Siobhan Briley, who conjured up the following links for me in a matter of seconds.
German DZ Bank sued JP Morgan Chase, using a Summons with Notice instead of a Summons and Complaint. This suggests there was some rush, because a Summons “with Notice” buys the Plaintiff a little extra time to draft up the Complaint and is usually employed when a Statute of Limitations is about to run out. DZ Bank also sued HSBC, also employing a Summons with Notice. Ditto Asset Management Funds suit against JP Morgan Chase, and Sealink Funding against Royal Bank of Scotland. There were also rather long Summons and Complaint filings the week before that by Barerschez Landesbank against JP Morgan Chase [despite looking pretty comprehensive, just by size alone, the document title is “placeholder complaint” also suggesting some rush], Dexia Holdings against Bear Sterns, and Dexia Holding against Morgan Stanley. These suits all seemed focused on the misrepresentations made in the sale of securities based on material misstatements about the quality of the mortgages, that is, that the pools were represented to have been composed of mortgages that met certain underwriting standards when, in fact they did not meet those standards.
This is interesting to me. Thus far, and please correct me in the comments if I am wrong, I don’t think any of the plaintiff RMBS purchasers have sued on the premise that the notes and mortgages were never properly transferred into the REMICS. That is, as far as I can tell, no purchaser of RMBS has alleged that they paid for a bag of mortgages, and received instead a big empty bag of nothing, or a bag with only 10 mortgages in it instead of 1,000.
Instead, the suits seem focused on proving something squishier, that the quality of the mortgages was not as good as advertised. It would seem the “no mortgages in the bag at all” case would be easier to prove than the case where the banks can disclaim liability by saying that they bought mortgages in good faith from originators who either lied to them, or were merely lax in enforcing standards or employed people with bad judgment.
In each instance, it seems that the plaintiffs, both governmental and private, have skipped the easier to prove and understand case in favor of a more difficult one. The government plaintiffs have also eschewed their biggest gun, the criminal indictment.
If the cases brought by Madigan and Schneiderman are the first in a series, I’m cautiously optimistic, because each, in their own way, lays out a compelling set of facts demonstrating that robosigning is fraud and forgery, not “sloppy paperwork”. If these cases are the foundation for more to come, I’m on board.
However, if this is all there is, it falls WAY short of what is needed and it’s back to picketing and Occupying and writing letters to the DOJ and the state AG’s offices protesting the settlement. I actually believe that the decision about whether these cases are just the beginning or not, depends on public reaction. If the public lauds them as only a great first step, the pressure will be on to follow up with more. If the public acts as if these small bones thrown its way are manna from heaven, then that’s all you’re going to get.