Dayen says the documents were phony because lenders were not adhering to the “chain of title’’ law: “In the simplest terms, to be able to foreclose, a financial institution must hold the mortgage, the (IOU) note, or both. This gives standing.’’
Because in “securitization,’’ originating lenders transfer the loan and the mortgage to other banks and they to still more banks, proving who legally held the mortgage and/or the note was muddied to the extreme.
“At each stage there would have to be documented evidence of transfer-like links in a chain—a chain of title, which lays out the different transactions. You can’t skip a link; the chain must show evidence of transfers…in precise order.’’
And, as all securitization trusts were set up as a real estate mortgage investment conduit (REMIC), if a trust closed without all key documents, the assets would not qualify for a REMIC tax exemption. Investors in for a windfall now had a tax problem. The boom ended.
The activists’ battle uncovered a lucrative foreclosure industry: offshore after-the-fact document creators and processors; low-level employees known as robo-signers who were designated as bank “vice presidents’’ and who improperly authenticated and notarized thousands of documents; and law firms known as foreclosure mills.
The Plantation, Fla., firm of David J. Stern was the most notorious of these mills. Disbarred in 2014, Stern, the “foreclosure king,’’ had a staff during the bubble of 1,500 processing more than 200,000 Florida home repossessions. The activists’ barrage of evidence of fraud helped expose Stern.
Syzmoniak now runs a non-profit foundation to investigate and create awareness of foreclosure fraud; Redman and Epstein work for a law firm specializing in representing foreclosure clients and Redman still operates 4closurefraud.org.
Their activism helped homeowners win foreclosure fights, led to the election of a foreclosure defense attorney to a Palm Beach County foreclosure judgeship and inspired Dayen to write this book.
He is measured in his epilogue about the future: “Grassroots movements can succeed in America. (But) what’s become of our system, that policy makers can ignore millions of pieces of false evidence used to dispossess Americans to this very day?
“(These) are difficult questions to answer. But the easiest way to discourage dissent is to cast it as hopeless; that robs the purpose from fighting.’’
Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud, by David Dayen. The New Press. 385 pages. $27.95
Eleanor O’Sullivan is an award-winning freelance journalist who writes for Financial Advisor magazine.