No Breaks for Robo Signing Robo Notary Computer Stamping of Documents

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No Breaks for Robo-signing Computer Stamping Mortgage Documents

By PrashantGopal - Nov 15, 2010 12:30 PM PT Mon Nov 15 20:30:32 GMT 2010

Lawsuits fighting some of the more than 4 million foreclosures have exposed sloppy recordkeeping and

raised questions about the validity of documents used to seize properties. Photographer: Jacob

Kepler/Bloomberg

Nov. 15 (Bloomberg) -- Comedian Jackie Knight, and her husband, retired pro wrestler Cougar Jay,

were on the verge of losing their St. Augustine, Florida, home when PNC Financial Services Group Inc.s

foreclosure hearing was canceled last month. Jackie Knight, whose real name is Lynn Moore, is among

the hundreds of thousands of Americans who dwell in the limbo between homeownership and eviction

as banks and courts sort through foreclosure cases. Bloomberg's Melissa Long reports. (Source:

Bloomberg)

Bryan Bly is a pen-wielding robo- signer at Nationwide Title Clearing Inc., inking his name on an

average 5,000 mortgage documents a day for companies such as Citigroup Inc. and JPMorgan Chase &

Co.

Those are just the ones that cross his desk.

Nationwide Title employs a computer system that automatically inserts a copy of Blys signature on

thousands of digital files that he never sees. The system even affixes an electronic notary seal.



The problem with the way these documents are created isnt because a computer is used, said Gloria

Einstein, a legal aid attorney in Green Cove Springs, Florida, who deposed Bly in a case in which her

client faces foreclosure by a unit of Deutsche Bank AG. Its because an enterprise has decided to use a

computer to create a system where nobody is responsible for the information and the decisions.

The rush to securitize more than $4 trillion of mortgages as U.S. home sales peaked in 2005 and 2006inundated loan servicers and contractors like Palm Harbor, Florida-based Nationwide Title that help

them handle paperwork. Lawsuits fighting some of the more than 4 million foreclosures since then have

exposed sloppy recordkeeping and raised questions about the validity of documents used to seize

properties.

Signatures Draw Scrutiny

Bly is just one of more than a dozen robo-signers deposed in the past two years by lawyers for

borrowers seeking to block foreclosures. Spurred by descriptions in depositions of employees signing

thousands of affidavits a week without checking their accuracy as legally required, the attorneys general

in all 50 states last month opened an investigation into whether banks and loan servicers used faulty

documents or improper practices to foreclose.

Nationwide Title, which has about 175 employees, provides document imaging, tracking, retrieval,

recording and processing on bulk loan transfers for lenders, servicers and investors. Its the largest third-

party processor of mortgage assignments, handling more than 350,000 last year, Senior Vice President

Jeremy Pomerantz said in a telephone interview. The company also prepares lien releases, which show

that a mortgage has been paid off by the borrower.

Assignments, which are usually recorded with county land record departments, list the buyer and seller

of a loan as its sold or packaged with other loans into a mortgage-backed security. Lawyers forhomeowners are challenging the legitimacy of the documents, which are relied on by lenders to show

they have the right to foreclose.

Batches of 30,000

(While closely held Nationwide Title in the past offered a package of foreclosure-specific services, it had

just one client, Pomerantz said. The company often doesnt know whether documents it prepares will

end up being used in foreclosure cases, he said.)

Nationwide Titles proprietary system isnt entirely automated, said Erika Lance, senior vice president of

administration. Employees receive requests from clients for l ien releases and mortgage assignments,which are often sent in batches of as many as 30,000. They review the information and images of loan

documents sent along with the request, and the information is keyed into the computer system.

The computer system fills in the electronic assignments in the format and wording each county requires,

and places a signature and notary seal from a list of employees approved by each bank. Bly and other

signers are given a title at the bank requesting the documents, such as vice president or assistant

secretary, depending on what the individual counties require, Lance said.



Laws Catching Up

Nationwide Title files documents with scanned signatures in the 10 percent of counties in the U.S. that

accept electronic mortgage assignments, including those for cities such as Chicago, Miami and Seattle,

according to Lance. She said producing electronic signatures in bulk is common in the industry.

The laws are catching up to what is occurring with documentation, she said. Electronic recording is an

accepted method of document recording.

Nationwide Title isnt alone in using electronic signatures. Angela Nolan, a JPMorgan Chase vice

president in Monroe, Louisiana, testified in a January deposition that banks computer system was

inserting employee signatures, including hers, in random order on some documents. She said the digital

signatures were used on allonges, which are added to promissory notes when more space is needed for

endorsements.

Random Selection

How is it determined which persons signature will get on the allonge? Dustin Zacks, an attorney for

Ice Legal PA in Royal Palm Beach, Florida, asked during the deposition.

I believe its just a random process of making sure you have the individuals, Nolan said. There are

certain titles that are required, assistant vice president, vice president, assistant treasurer. I believe they

just go in and randomly select those individuals.

Thomas Kelly, a spokesman for New York-based JPMorgan Chase, declined to comment.

While the law allows for electronic signatures and seals on assignments and lien releases, the signer

must physically appear before the notary, and the notary must affirm the signers identity, that the

signer is aware of what the document is, and that the signer is willingly executing it, said Michael

Robinson, executive director of the National Notary Association based in Chatsworth, California.

Must Read

The guiding principles behind it are the same as the guiding principles around paper notarizations, he

said.

Mark Ladd, a land-records technology consultant in Racine, Wisconsin, said the systems hes seen

require that the signer acknowledge that hes read the document and that the notary is physically

present.

The law requires that somebody review these documents themselves, Ladd said. The person who

signs the document makes a statement that they read it.

Nationwide Titles Pomerantz declined to say whether the companys system requires signers to affirm

they have read the document. He said document inspectors, a job sometimes performed by signers and



notaries, review signatures and seals on a computer monitor. The notaries know the identities of the

signers because they work in the same office, he said.

Relying on Staff

The signature is required to authorize it, Pomerantz said. The signature is not testifying in any way

that they prepared that or personally validated the information. They rely on their staff to validate.

Missing or incomplete paperwork has forced lenders to routinely recreate documents to show courts

they have standing to seize properties, said Jim Miller, the executive who oversaw foreclosure-

processing operations at JPMorgan Chase & Co. from 2005 to November 2008.

About a third of foreclosure files his teams handled were missing mortgage assignments. Servicers

would often write new assignments when judges requested proof that the party seeking to repossess a

property had the right to do so, he said.

What used to happen before the robo-signer issues is that youd find out while in the foreclosure

process that assignments needed to be done, and you had time to clean it up before the actual

foreclosure solidified, Miller said in a telephone interview.

At JPMorgan Chase, where Miller was managing director of the default group, the company began fixing

documentation prior to foreclosure more than two years ago in response to court rulings requiring

lenders to show evidence of owning the loan before taking legal action, he said.

Central Issue

Miller is now an independent consultant for the mortgage- servicing industry based in Dallas. Kelly, the

JPMorgan Chase spokesman, declined to comment.

The issue for courts to decide is whether banks are seizing homes that they never legally acquired,

visiting Harvard Law professor Katherine Porter told a Congressional Oversight Panel on Oct. 27.

The legal debate centers on whether assignments can be created to show transfers between banks that

happened years earlier, Porter said.

The largest and most complex harm that may exist with the loans in default or foreclosure today is that

the paperwork for the loans was not transferred correctly, Porter said. I emphasize that what

constitutes a correct transfer is a gray area; we need more direction from courts and legislatures on this

subject.

Ownership Questions

Joshua Rosner, an analyst at New York-based Graham Fisher & Co., has also questioned whether

mortgage-bond trusts did enough to take ownership of loans. Typical practices, such as fill ing in the

names of trusts on notes and completing missing links in assignment chains only after foreclosure work



has started, may encourage investors to challenge whether the debt met the requirements for delivery

under bond contracts, he said in an Oct. 27 interview.

At the end of the U.S. real estate boom in 2005 and 2006, about 70 percent of the $6.1 trillion in

mortgage lending was packaged into bonds, according to the Securities Industry and Financial Markets

Association in New York.

Paper documents were turned into electronic files so that they could be moved around quickly, and

shortcuts were taken to accommodate multiple transactions, said Alan White, a law professor at

Valparaiso University in Indiana. Promissory notes were endorsed in blank so that whichever company

held it could claim possession. And mortgages were sometimes assigned in blank.

Documents Destroyed

The foreclosure crisis opened up the process to scrutiny, as banks claimed to have lost thousands of

promissory notes and were instead showing judges copies, White said.

Virginia B. Townes, general counsel of the Florida Bankers Association in Tallahassee, said some banks

intentionally destroyed notes after scanning. Townes declined to name specific companies.

The problems were lurking in the files, White said. As long as people were paying and values went up

nobody cared. Fraud that happens during boom times comes to light in the bust.

One concern with recording transfers years after the fact is that many entities that might have had roles

in the securitization chain no longer exist, Porter, the visiting Harvard professor, said in her testimony.

Disappearing Links

To the extent that these transfers are being completed retroactively, it raises issues about honesty in

creating and dating the assignments/transfers and about what parties can do, if anything, if an entity in

the securitization chain, such as Lehman Brothers or New Century, is no longer in existence, she said.

New Century Financial Corp., once the largest independent subprime-mortgage lender, filed for

bankruptcy in April 2007. Lehman Brothers Holdings Inc. was the fourth-largest U.S. investment bank

when it went bankrupt in September 2008.

It doesnt matter when mortgage assignments and endorsements are recorded because the existence of

the pooling and service agreement and purchase sale agreement is proof in itself that the loan was

conveyed, said Stephen Ornstein, a partner in the Washington office of SNR Denton, a law firm thatrepresents loan servicers and lenders.

If the assignment is missing, you can create it by having the old assignee reassign it to you, Ornstein

said.

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