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Aiding and Abetting Mortgage Fraud

Posted by Larry Doyle on October 19, 2010 4:54 AM |

While selected Wall Street banks and their cronies in Washington may want to downplay the depth and impact of the mortgage fraud embedded in our national foreclosure crisis, anyone with a modicum of ‘sense on cents’ knows that this fiasco has many players with their hands in the till. Our friends at The Center for Public Integrity recently highlighted the manner in which those in the legal profession have aided and abbeted this enormous fraud. Let’s navigate.

The role of lawyers in the foreclosure process has garnered less attention, but they play a big role, especially in those states that require banks to go to court to get a foreclosure order. (The same states where the lenders have suspended foreclosures). In these states, banks are required to produce a notarized affidavit of a loan officer and submit the mortgage documents. Those documents, though, are difficult to produce, thanks to the securitization craze.

As CNBC notes in this helpful primer to the foreclosure crisis, every time a mortgage changes hands, the new owners are supposed to receive an “assignment” of the mortgage notes from the buyers. For securitized loans, the mortgages are assigned to a specially created investment vehicle.

During the housing bubble, however, the notes and other critical documents were often either not properly transferred or simply not created. Other records vanished along with failed brokers and lenders. This means that lawyers charged with putting together the paper trail often have a tough job. Over the past few years, some have used shortcuts.

Under the law, a firm must complete, sign, and notarize the document that affirms who holds the mortgage, and is thus legally permitted to seize someone’s home. As Mother Jones reported in August, the David J. Stern law firm, which once controlled one-fifth of Florida’s foreclosure services market, backdated dozens of these mortgage assignments, allowing them to file with the court first and do their paperwork later.


A subsequent deposition with Tammie Lou Kapusta, a former paralegal at the firm, by Florida Attorney General Bill McCollum’s office exposed the scope of the wrongdoing at the law firm. Kapusta alleges that the lawyers were robo-signing thousands of documents each day without reading them. She said they were also manufacturing documents, forging the signature of one senior paralegal on key documents, and writing in false Social Security numbers, all with one aim: To process as many foreclosures, and to collect as much money in fees, as possible.

“Somebody would get a 76-day foreclosure,” one former employee of the firm recalled, “and then someone else would say, ‘Oh, I can beat that!’”

The firm also failed to give homeowners notice that the bank was foreclosing and invented John and Jane Does to be served, even if they didn’t exist.

McCollum’s office is also investigating Florida Default Law Group, the Law Offices of Marshall C. Watson, and Shapiro & Fishman — three firms that may have employed similar tactics.

Evidence of lawyer wrongdoing is spreading. From an attorney writing for Daily Finance:

I’ve reviewed a couple documents from New York involving a lawyer/robo-signer named Elpinicki Bechakas of the firm Steven J. Baum, where she signs on behalf of mortgage loan registry MERS, assigning mortgages to the firm’s clients to enable them to foreclose. At least one judge in a case involving her documents has recognized the conflict of interest inherent in a law firm assigning the property of one entity, presumably its client, to another entity, also its client, at least without written permission from both entities.In Maryland, the Baltimore Sun reported this week that two firms handling foreclosures filed court documents in that state without signing the papers themselves. The two attorneys, Jacob Geesing, of Bierman, Geesing, Ward & Wood in Bethesda and Thomas P. Dore of Covahey, Boozer, Devan & Dore have filed more than 20,000 foreclosure cases in Maryland courts since 2008.

How deep will the robo-signing foreclosure scandal spread into law firms that service big lenders?

With investigations just ramping up across the country, these examples of wrongdoing are likely the tip of the iceberg.

The fact of the matter is our national economy has already hit the iceberg. While the wizards in Washington try to stave off the sinking of our economy, will the fraudsters be held accountable? Will the Wall Street-Washington incest be exposed in the process? Those with sense on cents know that fraud and incest very often go hand in hand.

Navigate accordingly.

Larry Doyle

  • coe

    LD – Toss another log onto the fire – the lawyers and other temporary hired guns who were paid by the piece to do their part to facilitate the disposition of foreclosures. It’s really difficult to find stand-up decency anywhere in the chain of events. As Bob Dylan wrote – dignity had left the seen. What a shocker! Incentives have been misaligned for several decades. Everyone felt “entitled” to take their own pound of flesh. So what if “short cuts” and liberties became the order of the day. It has been and will continue to be be a major undertaking to unwind the whole mess. And speaking of lawyers, it seems to me that they will have to play a central role in the big fix – talk about a permanent employment act. At the same time, we should not lose sight of the fact that most of these foreclosures are occurring quite simply because the homeowner did not pay the mortgage – nobody put a gun to the homeowner’s head and said you must overleverage, and sadly, nobody could have timed the global capital markets collapse – and that is pretty black and white.

    As we have said quite often, there is plenty of blame to go around. Stop the current madness. Allow markets to clear. Go back to basics. Remember that every concession, every subsidy, every government program carries a huge cost – in both economic and moral hazard senses. There are lots of fees and billable hours out there – Is it too late to go to Law School?

    When an entire channel of industry devoted to originating, securitizing, conveying, investing, and repairing mortgages is racing for profits, and there was seemingly an eternal fountain of profits there for the taking, is it any wonder that ethics and some innocent victims were trampled.

  • fred

    What about all those points paid for proper mortgage origination by homebuyers? Should I be expecting a rebate check in the mail?

  • Rob

    I dont fault anyone for making money but greed is just down right evil and is the root of most of our country’s problems

    • fred


      I don’t think the issue should be greed, it should be about enforcing the laws on the books by punishing those who don’t abide by them thru civil (treble damages rather than SEC slap on the wrist)and prison time.

      If you want to make more money than me by working harder or smarter, within the law, what gives me the right to judge you as being greedy or stop you from providing your family a better lifestyle/security, isn’t that the American entrepreneurial spirit, why stifle it?

  • Matt

    Larry –

    Have you seen that PIMCO, Blackrock, the New York Fed and 5 other institutions have all joined together and are collectively suing Bank of America to buy back $47 billion of Mortgage Backed Securities? Isn’t this a HUGE development? Does Bank of America have the capital reserves to actually do this? Will they need another bailout in order to do this? Won’t this lead to many other institutional investors doing the same thing? Here’s the story:


    • LD


      Very interesting. On one hand this may be potentially the tip of the iceberg. Don’t think for a second that all these players were not fully aware of these embedded issues for a long time.

      On the other hand, though, and as I think about this I think there is a very real possibility this is an entirely scripted and coordinated program on behalf of these firms which may lead to an effort to write down principal on a host of mortgages.

      Call me twisted BUT I could see that happening.

      Why do I think this? No managers have been closer to Uncle Sam than Pimco and Blackrock. The fact that the New York Fed is also involved….hmmmm.

      Call me suspect as to the real integrity of this letter and complaint.

      • Matt

        Wow Larry – very true that Pimco and Blackrock are very intertwined with the government and the government (sort of) is also one of the insitutions suing. Also to your point are two more very curious facts: Bank of America owns 34% of Blackrock (inherited that position when they acquired Merrill Lynch) AND Blackrock is the largest shareholder of Bank of America – 5.4% of the outstanding shares. Ummm, conflict of interest maybe? Haven’t you said once or twice that Wall Street is incestuous? I think both facts support your speculation and suspicion.

  • Sean

    Don’t lose the forest for the trees. Got Gold?

  • JMM

    The mortgage and foreclosure industry is so much more complex than your article points out.

    First of all MERS is a Mortgage Electronic Registry owned by most of these banks. They are the record holder of the mortgage in *name only.*

    This allows the mortgages (and notes) to be reassigned within this sub-market without the need to pay the recording fees. It allows for the, shock, wait for it… free flow of commerce in the mortgage market. MERS keeps track of the assignments in house, and then MERS will reassign the mortgage to the entity discharging or foreclosing on the mortgage, or assign it to a non participating mortgage company. Why people have a problem with this is beyond me.

    With all these people looking for conspiracies and frauds, one thing everyone keeps losing sight of is this…. for every ONE mortgage that may be erroneously referred for foreclosure, there are THOUSANDS of mortgages in default. If a bank cannot reclaim the security for the defaulted debt, why should a bank lend the sums required to purchase a home?

    Also, for every ONE erroneous foreclosure, there are HUNDREDS of strawman/fraudulent transactions designed to take the cash and the house.

    Don’t get me wrong… banks aren’t exactly the victims here either. Bank mortgage servicing corporations are about as dirty as you can get.

    Banks lent money to people they shouldn’t have or in amounts that they shouldn’t have. The people who made money at the expense of everyone else were the mortgage brokers.

    Don’t assume just because Elpiniki Bechakas is an employee of Steven J. Baum, P.C. and signs on behalf of MERS, that she is fraudulent. Careful of the libel you may be spouting. You may not know/have all the facts.

    • lou


      “Don’t assume just because Elpiniki Bechakas is an employee of Steven J. Baum, P.C. and signs on behalf of MERS, that she is fraudulent.”
      I was recently in a County Clerks ofice and found Ms. Bechakas’s signature on thousands of AOM’S. Why is she trying to assign mortgages into trusts that were closed years ago. If you loook at most PSA’s all notes and mortgages had to be in the trust within 60 – 90 days of the trust closing. I don’t know if it’s fraud or not, hopefully the courts will let us all know.

      • KAS

        JMM –

        see LaSalle Bank N.A. v. Smith, 2010 NY Slip Op 50470(U):

        Finally, for reasons unknown to this court, Ms. Bechakas, the attorney of record for subordinate mortgage defendant MERS, as nominee for FIRST FRANKLIN FINANCIAL CORP., failed to disclose to the Court that she is employed by plaintiff’s counsel, Steven J.Baum, P.C. My March 17, 2010 examination of the Office of Court Administration’sAttorney Registry reveals that Ms. Bechakas, admitted in the Fourth Department in 1991, lists her business address as “Steven J. Baum, P.C., 220 Northpointe Pkwy, Ste G., Amherst,
        NY 14228-1894.” As noted above, Steven J. Baum, P.C. is the attorney for plaintiff LASALLE. The Court is concerned that the simultaneous representation by Steven J. Baum,
        P.C., of both plaintiff LASALLE and subordinate mortgage defendant MERS, as nominee for FIRST FRANKLIN FINANCIAL CORP., is a conflict of interest in violation of 22
        NYCRR § 1200.24, the Disciplinary Rule of the Code of Professional Responsibility, entitled “Conflict of Interest; Simultaneous Representation,”

        Need we say more????

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