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Authors: David Dayen

Chain of Title

BOOK: Chain of Title
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“Dayen illuminates how, during the past 10 years, home buyers ended up illegally evicted from their residences as the result of dishonesty, greed, and heartlessness involving mortgage lenders, mortgage servicers, investment bankers, and unscrupulous lawyers. . . . An inspiring, well-rendered, deeply reported, and often infuriating account.”

(starred review)

“Dayen brilliantly reveals the triumph of three ordinary Americans as they and their supporters exposed millions of foreclosure frauds—and their betrayal by law enforcement. He shows that the rule of law does not apply to Wall Street, and the result is an orgy of elite crime and plunder.”

—William K. Black, former federal bank regulator who helped convict more than one thousand bank executives during the savings and loan crisis and author of
The Best Way to Rob a Bank Is to Own One

“Heartbreaking, inspiring, and enraging all at the same time, David Dayen's
Chain of Title
will leave you seething at one of the great crimes and injustices of the financial crisis. An essential book that humanizes the crisis by telling it through three remarkable individuals who refused to accept the label of victims and instead became crusaders for justice.”

—Neil Barofsky, former special inspector general, Troubled Asset Relief Program

“David Dayen first wrote about foreclosures as a scruffy blogger and consistently beat almost every established financial reporter to the story. Now he has written the best history of that shameful period. The mortgage industry spent untold millions to spread the story they created from whole cloth after the crisis hit: families who lost their homes were mostly undeserving spendthrifts trying to shirk just debts.
Chain of Title
tells the real story and the real story should offend the sense of justice of every American with a conscience.”

—Former congressman Brad Miller (D-NC), original co-author of the section of the Dodd-Frank Act that created the Consumer Financial Protection Bureau

© 2016 by David Dayen

All rights reserved.

No part of this book may be reproduced, in any form, without written permission from the publisher.

Requests for permission to reproduce selections from this book should be mailed to:

Permissions Department, The New Press, 120 Wall Street, 31st floor, New York, NY 10005.

Published in the United States by The New Press, New York, 2016

Distributed by Perseus Distribution

978-1-62097-159-8 (e-book)

CIP data available

The New Press publishes books that promote and enrich public discussion and understanding of the issues vital to our democracy and to a more equitable world. These books are made possible by the enthusiasm of our readers; the support of a committed group of donors, large and small; the collaboration of our many partners in the independent media and the not-for-profit sector; booksellers, who often hand-sell New Press books; librarians; and above all by our authors.

Composition by Westchester Publishing Services

This book was set in Minion

Printed in the United States of America




A Knock at the Door

The Dark Side of the American Dream

Securitization FAIL; or, Cirilo Codrington and the Panama Doc Shop

The Originator

The Community

Mr. Anonymous

When Michael Met Lisa

Happy Hours

The Network

The Specialist

Black Deeds

The Revolution Will Be Blogged

The Ninth Floor

The Rally in Tally

By Any Means Necessary


The Big Time

We Will Put People in Jail

Wriggling off the Hook

The Final Whitewash

Lisa's Last Stand






There is a rot at the heart of our democracy, rooted in a nagging mystery that has yet to be unraveled. It gnaws at people, occupies their thoughts, leaves them searching for answers in the chill of the night. Americans want to know why
no high-ranking Wall Street executive has gone to jail for the conduct that precipitated the financial crisis.

The oddest thing about the predominance of the question is that everyone already assumes they know the answer. They believe that too many politicians, regulators, and law enforcement officials, bought off with campaign contributions or the promise of a future job, simply allowed banker miscreants to annihilate the law in pursuit of profit. But they must not like the explanation very much, because they keep asking why, as if they want to be proven wrong, to be given a different story.

Maybe they don't like the implications of a government that lets Wall Street walk. It does too much violence to the conception of the country they have in their mind, with its ideals of justice and fairness. It explains the disempowerment people feel in the face of a rigged economic and political system, with differing standards of treatment depending on wealth and power. It engenders a loss of faith in core institutions, turning our democracy into a sideshow, where the real action happens offstage. It inspires people to don tricornered hats and protest crony capitalism, or pitch camp at the base of Wall Street and refuse to move. It generates a profound anxiety, for if bankers can bring the economy to the point of ruin and get away with it, what's to stop them from doing it again? It makes our economy seem too fragile, our laws too impotent.

Or maybe people just want the details filled in, to confirm their suspicions, so they can point fingers at those who created this two-tiered system of accountability. There must be a set of facts that prove we're living in a new Gilded Age, where holders of prodigious wealth guide government policy the way a string guides a marionette. There must be a smoking gun.

Those details are available, but not where most chroniclers of the financial crisis have ever cared to look. They usually take a ten-thousand-foot view, recounting stories of the hubris of bank CEOs or tracking the swashbuckling, without-a-net exploits of those tasked with stanching the bleeding. But few have offered the perspective of millions of ordinary Americans, the ones who never visited a Wall Street office tower or a Washington conference suite, and who endured most of the suffering that resulted from the crash. At ground level, the crisis was not a cautionary tale of greed or an adventure plot: it was a tragedy, too casually hidden from view.

Starting in 2009—as the crisis raged—three of these ordinary Americans decided to take on this mystery for themselves, to fill in those details, to understand what Wall Street perpetrated and why. In so doing, they played a significant role in uncovering the largest consumer fraud in American history.

They didn't work in government or law enforcement. They were not experts in real estate law. They had no history of anti-corporate activism or community organizing. They had no resources or institutional knowledge. They were a cancer nurse, a car salesman, and an insurance fraud specialist, and they were all foreclosure victims. While struggling with the shame and dislocation and financial stress that foreclosure causes, they did something extraordinary: they read their mortgage documents. Wall Street's scheme was not hidden but readily apparent in millions of pieces of documentary evidence, and to be a whistleblower, you just had to pay attention.

All whistleblowers are a little bit crazy. They obsess over things most people overlook. They see grand conspiracies where others see only shadows. In this case, these whistleblowers, armed with only a few websites and a hunger for the truth, found that the mortgage industry fundamentally ruptured a centuries-old system of U.S. property law; that millions of documents generated to foreclose on people's homes were phony; and that all those purchasing a mortgage in America were taking a gamble that they
would be tossed onto the street with nothing, even if they made every payment and played by the rules. Virtually everyone to whom they presented this information reacted the same way: “That can't be true.” Right up until the day the banks admitted it.

These three—Lisa Epstein, Michael Redman, and Lynn Szymoniak—unearthed another layer of the mystery, too. After they exposed foreclosure fraud and forced the nation's leading mortgage companies to stop repossessing homes, they saw firsthand the unwillingness of our government to deliver any consequences. In fact, walk into any courtroom today and you will see the same false documents, the same ones Lisa, Michael, and Lynn exposed, used to foreclose on homeowners.

As America searches for understanding amid the perversity of the financial crisis, they should know that there were a few determined people, far from the corridors of power, who tried to write an alternative history, one where the perpetrators of fraud get rounded up and put away. But the same democracy that allows ordinary Americans to collaborate and organize and build a movement allows their deep-pocketed opponents to use the tools of entrenched power to counteract it. And we have to reckon with the fact that, in our current system of justice, who you are matters more than what you did.

Michael Redman, one of these whistleblowers, sat next to me one night as he told me his story, and said over and over again, “I don't believe your book. I lived through it, and I don't believe it.” I will forgive readers their skepticism, as even a protagonist in the tale shares it. It is unbelievable. That doesn't make it untrue.



As a man is said to have a right to his property, he may be equally said to have a property in his rights.

—James Madison,
National Gazette
, March 29, 1792

February 17, 2009

The sun crept down over the Intracoastal Waterway, separating Palm Beach from its companion cities to the west. With the proper nautical chops, you could navigate from Norfolk, Virginia, to Key West through this shore-hugging water highway bordering open ocean, down through the Great Dismal Swamp, under the Hobucken Bridge, across the marshy lowlands of South Carolina and Georgia, and through the Mosquito Lagoon Aquatic Preserve, on the Indian River near the city of Edgewater. Eventually you would hit Palm Beach, located on a sixteen-mile-long barrier island of manicured lawns, ritzy mansions, and precisely fashioned grains of sand, a place where American ingenuity and truckloads of money summoned paradise out of the Atlantic. A few miles inland, amid vacationers and part-time snowbirds seeking refuge from winter winds up north, a car motored down Route 80 to tell Lisa and Alan Epstein that their bank wanted to take their home away.

Florida felt the worst of the Great Recession's force, a financial hurricane that spared almost nobody, not even in paradise. This was one of the “sand states,” warm-weather regions of the country with economies disproportionately based on real estate.
Home prices in Florida, Arizona, California, and Nevada surged more than 264 percent from 1998 to 2006. Over
half of all subprime mortgages written in 2006 were issued in these four states. “Sand states” turned out to be an accurate description of the market's feeble foundations, as prices crumbled and industries that supported and sustained the bubble washed out.

In fact, Florida suffered two waves of foreclosures. The first engulfed those who purchased or refinanced mortgages at the height of the bubble, in 2004, 2005, and 2006. While tagged as “irresponsible,” these homeowners actually suffered from inadvertent timing and susceptibility to predatory lending. When prices sank, borrowers went “underwater”—owing more on the mortgage than the homes were worth. They couldn't sell or refinance to escape, and many couldn't afford the payments to begin with. This led to defaults, even in Palm Beach. Then came the second wave, relentless ripple effects from unemployment in real estate, construction, and pretty soon everything else, swallowing those who paid their mortgages effortlessly for years. Suddenly hundreds of thousands of Floridians needed help, and help was slow to come.

So it was not uncommon to find cars like the four-door sedan motoring past West Palm Beach's shiny subdivisions. Process servers contracted by “foreclosure mill” law firms, so named because they pumped out foreclosures the way a textile mill would fabrics, made their daily rounds here, unsmilingly handing homeowners legal documents and informing them that as a result of their failure to pay their mortgage promptly, their lender would place them into foreclosure.

By early 2009,
one in twenty-two Florida homeowners had received some sort of filing like this, such as a notice of default, court summons, auction sale, or foreclosure judgment—nine times the historical average. Local sheriff's deputies used to deliver the papers, but there were now too many to handle. So the foreclosure mills had to hire private contractors; it represented one of the few recession-era growth industries in the state.

Nobody on either side of the transaction felt particularly good about it. The process servers greeted eyes filled with tears, faces lined with desperation. The full force of post-recession fury at Wall Street malfeasance and personal tragedy refracted onto them. Though business boomed, it was shit work, the misery beat. In fact, you can almost understand why some contractors ducked the emotional tumult by resorting to
“sewer service”—a popular scam where they would simply throw envelopes in front of the home, technically fulfilling their obligations while ensuring that the homeowner would not see the complaint or know to show up for court. This was illegal, but it also carried the benefit of being way faster than actually knocking on the door, increasing volume—and profits.

Sensing opportunity, some process servers and foreclosure mills even invented
fake recipients of foreclosure papers. In Pasco County, Judge Susan Gardner found numerous charges for serving papers to “unknown spouses” and “unidentified tenants.” One process server in Miami listed forty-six defendants on a single property, racking up $5,000 in fees. He claimed he had to serve everyone in the state with the same name as the homeowner, in case one of them was the real defendant. Every two-bit business in Florida had its own way of skirting the edges of the law to get ahead; this was a particularly crude one.

As for the homeowners, news of foreclosure tore through their front door like a wrecking ball. Taking a family's house involved taking their spirit and snuffing it out like a candle, the bright light fading into smoke. Millions of Americans who thought they gained a foothold in the middle class, a clear pathway to wealth and economic security, absorbed the collateral damage of a fatal miscalculation on Wall Street.

This evening's pageant of process serving would come to rest at 607 Gazetta Way, in an unincorporated area near West Palm Beach, a classic post-boom development of oversized properties on small lots. Built in 2006, the three-bedroom, two-bathroom, one-story home with a clay tile roof and yellow siding was wedged between a collection of larger properties all painted the same, as if the builder decided yellow was the optimal color to convince buyers to take the leap. Inside the house, the Epstein family had no warning of their impending visitor.

Lisa Epstein sat on a ledge in the master bathroom, hospital scrubs rolled to her knees, her daughter Jenna kept upright in the bathtub by a reclining baby seat. Lisa's brown hair was pulled back with her trademark multicolored scarf, the kind you would see in the 1970s, maybe on
The Bob Newhart Show
. She had blue eyes, soft features, and a laugh you could hear across a crowded room. When she got excited she got very loud. But at the moment she focused on her daughter in the tub.

Blond-haired, big-eyed Jenna had been born with a mild form of spina bifida. Her spinal cord was tethered at the base, something that could generate motor control problems as she grew. The child would turn two in March; surgery had been scheduled for April. And Lisa could think of practically nothing else, ministering to Jenna at nearly every waking moment. As a cancer nurse, she worked with families coping with the stress of a sick
child. Now she was experiencing the same emotions: consumed by the same yearning to keep her daughter comfortable, and at stray moments wondering how this beautiful creature could be marked for affliction.

Lisa was forty-three, a nurse, a wife, and a new mother. She had only lived in the house two years. And her life was about to change forever.


She did not hesitate for a second. “That's about the house, Alan!” she yelled out to her husband. “They're from the bank, and it's not good news!”

Lisa Epstein dreamed of following her father, a pediatrician, into medicine. After earning a nursing degree from George Mason University in 1988, she bounced around the mid-Atlantic from one job to the next: the pediatric intensive care unit at D.C. Children's Hospital; an OR in Rehoboth Beach, Delaware; an endocrinology unit at the National Institutes of Health. Soon she started her own business as a freelancer in Columbia, Maryland, working with terminally ill patients in home care, while filling in for nurses across the Washington Beltway.

Lisa chose to enter an area of nursing that involved long-term, one-on-one collaboration with people who were at the end of their lives and often aware of their own mortality. There were daily duties, techniques to make patients comfortable and free of pain. And she loved the perpetual motion of the job, marking her ability in the eyes of her patients. But to Lisa, the real appeal was the challenge of being the last new person these terminally ill people would ever connect with, a confidant amid an atmosphere of grieving. Lisa would make her patients laugh, hear their stories, pray with them, cry with them, and give them strength when needed. Building intimacy and trust helped keep people alive, too.

Part of the job involved knowing when and how to tell patients, “It may be time for you to videotape yourself reading bedtime stories to your grandchild. I'm not saying you won't be there to read to them, but with this new information from your scan, it would be nice for your family to have that.” Even doctors flinched at such naked honesty. Everyone in the medical system, on both sides of the desk, clings to the faintest possibility of recovery. If treatments A, B, C, D, E, F, and G don't work, let's try treatment H. But someone has to stress the importance of organizing thoughts, of compensating
loved ones with the word “goodbye.” In those darkest moments of loss and depression, the truth can be an odd comfort. It took as much skill as knowing how to connect an IV or read an EKG.

Over nine years in the D.C. area, Lisa built her freelance nursing business, helping patients balance hopes of recovery with the realities of the life cycle. She had lived in the region since early childhood, and while she wasn't too interested in politics, she grew accustomed to the dynamic, politically charged environment. Plus D.C. had another side: a storehouse of experts with accumulated wisdom on virtually every topic. Whenever she found herself in the District, Lisa would find a lecture on something she knew nothing about. Away from the stress of caretaking, it was nice to decompress and enter an unknown world.

But these were also restless years for Lisa. Every fall, when the leaves changed color and the clouds rolled in, she would feel a powerful rush of sadness, bursting into tears for no reason. These days they call it seasonal affective disorder, but Lisa never gave it a name. She just recognized the need for a change of scenery. So in 1997 Lisa decided to head to Florida for the winter. The state had three renewable resources: alligators, palmetto bugs, and the elderly, and the last meant that nurses never had trouble finding work.

After writing a few letters, Lisa got offered a temp job at a chemotherapy infusion center at Good Samaritan Medical Center in downtown West Palm Beach. The work sounded grueling, but Lisa focused on three syllables: Flo-ri-da. She packed a bag, locked up her apartment in Maryland, and drove down I-95.

A week or so after taking the job, Lisa strolled outside the cancer center on her lunch break, and under a cloudless sky she sat on a seawall in front of the Intracoastal Waterway. Palm trees lined the waterfront; the view seemed to go on for miles. Lisa felt the sun on her face and listened to the dull hum of the water cresting against the barricades. Her legs dangled below the seawall, her head raised to meet the light.

She never left Florida again.

Nearly every day that first year, Lisa would come home from work (the temp job soon became permanent), change into a bathing suit, and stroll along the beach, the spray from the Atlantic Ocean hitting her bare toes. She
missed the fast-paced lifestyle in D.C.—she even subscribed to the Sunday
Washington Post
to keep up with the news. But the sun and the sand provided ample reimbursement.

Lisa initially stayed with family—her mother's parents lived in the area—then rented a townhouse recommended by a patient. Within a couple of years she wanted to put down roots, a major decision. Lisa had always been conservative with money. She stashed away her paychecks, clipped coupons, and skipped extravagances. Her hobbies included such inexpensive pursuits as reading and walking. This gave her sterling credit and plenty of savings for a down payment. While Lisa hesitated at the commitment attached to homeownership, she determined that Florida was where she wanted to be.

Real estate agents routinely tried to upsell Lisa. She gave them a price range, and they would show her houses 25 percent above it. So Lisa cut her price range by 25 percent and was then shown places within her limits. That meant a lot of condos and a lot of junk. Lisa had two non-negotiables: a balcony and a view of the water. “I don't care what it looks like on the inside,” she'd tell the agents. They'd smile and show her a snappy two-bedroom with granite countertops, where if you stood in the corner of the balcony and leaned out far enough to the left, you could maybe spot a tiny lake. The foray into home buying just wasn't working out.

Then Lisa read in the newspaper about a 700-square-foot one-bedroom, owned by a retired couple who loved the place but wanted to move from the fifth floor to the second to make things easier. Lisa went out to see the 1960s-era white building, known as the Royal Saxon, at the southern tip of Palm Beach. The interior resembled an old hotel just past its prime, and the apartment was definitely small. But the balcony looked directly onto the Intracoastal Waterway, with swaying palm trees and the bridge to Lake Worth on one side and boats tied up on a little dock below. Though she would be the youngest tenant in the building by about thirty years, Lisa instantly pictured herself there.

There was one problem. The apartment was a New York City–style co-op.
Instead of obtaining a mortgage, purchasers take out loans to buy shares in a corporation that owns the entire building, enabling them to occupy one of the units. These “share loans” include the cost of maintenance and upkeep, much like a homeowners association fee. Tenants don't own their residence
when they complete the mortgage payments, but they own a stake in the property, which they can sell at the market rate.

Share loans are often cheaper than traditional mortgages, but because of their uncertainty—for example, defaults by one resident can force others to carry their costs—lenders steer clear of them, particularly in places like Florida, where they aren't widely used. That's what happened to Lisa, whose preapproved financing collapsed.

BOOK: Chain of Title
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