The “Go Nowhere Foreclosure Fraud Legislation”
naked capitalist reports:
Having sold out the possibility of getting a decent settlement for homeowners for a seat in Michelle Obama’s box at the State of the Union address and a star turn on a Potemkin mortgage fraud task force, Schneiderman appears to be an adept student of the Obama strategy of preferring empty gestures to substance, since they generate good PR and take a lot less effort.
The latest headfake is that Schneiderman has presented a bill to the New York State legislate opposing foreclosure fraud. What’s not to like? Well, for a former state Senator who got some heavily contested legislation through, Schneiderman appears not to even be doing the basics. From the Politics on the Hudson blog:
Schneiderman said the bill has an Assembly sponsor in Assemblywoman Helene Weinstein D-Brooklyn, but he didn’t mention a sponsor in the Senate—where Schneiderman was a member.
No Senate sponsor for a late-in-session bill? And it’s even later than that. Nevada’s attorney general, Catherine Cortez Masto pushed for legislation to criminalize foreclosure abuses and it became law last October. Schneiderman and Masto were almost certainly communicating last year; he was probably aware of the legislation before it was passed. Why did he take so long to launch (feebly) a similar measure here?
And this was tried in other forms:
He’s on for 3 segments of “UP! with Chris Hayes”, and talks about the process of investigating and prosecuting for mortgage securities fraud. He tells how the President’s statement affects this, and says rising up of the people has helped. He must be speaking of the Occupy movement.
And not much happened.
By contrast, the New York courts were swift to act when the robosigning scandal broke. A mere month later, it imposed a certification requirement which had the effect of lowering the bar for sanctioning attorneys for failing to take “reasonable” steps to verify the accuracy of documents submitted to the court. This has a chilling effect. Foreclosure filings plummeted. This was a de facto admission that the banks were not able, by legal means, to establish in court that they had the right to foreclose.
Now one might argue that this bill (were it ever to pass) still has merit because it, like the Nevada bill, criminalizes foreclosure abuses and preparing other types of false mortgage documents (like HUD or FHA documentation), and not just for attorneys, but for other document preparers and their managers. Even so, Schneiderman’s bill is less bloody minded than Masto’s. Hers had up to 10 years in prison and a $10,000 fine per violation. By contrast, it takes five or more incidents of bad conduct in one year to get a class E felony conviction, which would lead to up to four years in prison.
A big potential weakness in the Schneiderman bill is it requires that the staffer or manager preparing/overseeing documents believe they are false. Ex bogus notarizations (the rules there are simply and widely understood), servicer personnel are convinced they did nothing wrong. And I am not making that up. I spoke at a conference on the chain of title issue, and servicer managers there treated me as if I was crazy. They seemed to have absolutely no appreciation of how pooling and servicing agreements stipulated how mortgage notes were to be executed (through a specific chain of title by a date certain, with wet ink signatures). Even when I explained it privately to some of the smaller “combat servicers” (one with much higher levels of staffing who can handle portfolios with high levels of delinquencies and do mods), they were incredulous. Similarly, I’ve seen a lawyer at a supposedly reputable law firm admit under oath to executing documents they weren’t empowered to sign. She didn’t seem to recognize the significance of her revelations.
I’m told procedures developed in the servicing industry in the wake of the S&L crisis to transfer loans out of failed S&Ls, and the same processes have been used with securitized loans. But the problem is you can transfer a bank-owned loan any time, right up to the eve of foreclosure. A securitized loan is a completely different beast. That doesn’t mean in gross situations (“surrogate signing” aka forgeries) that employees would not recognize that what they were doing did not pass the smell test, but I can see servicer staff saying with a straight face that they thought there was nothing wrong with fabricating an allonge.
But we are nevertheless going to be subjected to more praise of Schneiderman’s empty accomplishments, when the focus should instead be on his betrayal, of joining the mortgage task force and going silent on where he stood on the mortgage settlement, which enabled the Administration to push it over the line. But with Netroots Nation heaping praise on him, there is no reason to expect anything other than political theater from the New York attorney general.