Chain of Title (25 page)

Plaintiffs had a new innovation in their cases: the “ta-da” endorsement. “Original notes” would magically appear on the day of the hearing, without time for the defense attorney to examine them. Previous notes were frequently unendorsed, in violation of the pooling and servicing agreements governing the securitization. But these new “original” notes would sprout endorsements on them. Evidence was manufactured to custom-fit whatever the banks needed. Lots of these suddenly appearing endorsements came from Countrywide, which like most of its mortgage originator counterparts was no longer technically in business.
Lynn compiled dozens of examples.

As for the Florida Supreme Court's new verification standard, most law firms simply ignored the requirement. Shapiro & Fishman, a large foreclosure mill, tried to get a rehearing from the supreme court, stating outright, “
Holders of the notes are often unfamiliar with the status of the notes.” Lisa summarized the claim this way: “Your Honors, all we know is that someone, at some point, owed something to someone else.”
She teamed up with Nye Lavalle, writing a sixty-six-page response to Shapiro & Fishman. The verifications that law firms did produce looked odd. Michael found one from PNC Bank signed by an “authorized officer” (of what, it didn't say). It looked like the industry just
switched from robo-signers to robo-verifiers.

Lisa wanted copies of these ta-da endorsements and weird verifications. But in June the file room supervisor handed Lisa an official-looking cease-and-desist order, forcing her to stop all personal scanning of documents. The supervisor gave Lisa two choices: go back to paying $1 per page, or cover the $22.75 hourly wage and benefits of one file clerk, who would pull files and monitor the scanning. Lisa considered it ridiculous to have a foreclosure document babysitter, especially because of the supervisor's reason: fees were necessary to keep the court running. The court could have tossed out every case without a proper verification, forcing mortgage companies to refile and pay a new $1,900 filing fee each time. And they were
worried about $1 a page? Nevertheless, she doled out the $22.75 an hour for the document babysitter.

Lisa obsessed over what to do about blatant violations of the verification standard, something she helped get through the state supreme court. She emailed the chief judge in Palm Beach County and other court officials. One day she learned that the Palm Beach County Bar Association Professionalism Committee held monthly lunch meetings. Lisa contacted Kara Rockenbach, the committee co-chair, asking them to address this issue. “How is anyone to have faith in our judicial system,” Lisa wrote, “if the opposing counsels' officers of the court can unilaterally elect to opt out of the Rules of the Court?”

Rockenbach wrote back, “I will add your issue to our agenda and can provide 5 minutes for presentation and 5 minutes for discussion.”

The day of the meeting, Lisa and Michael (as usual, they went as a team) arrived at a West Palm Beach office building. Kara Rockenbach invited them into the cafeteria for lunch; Lisa helped herself to a Diet Sprite. “We're very excited for your presentation,” Rockenbach said. “I hope you don't mind, we invited someone who's very interested in professionalism, Judge Sasser—”

Lisa spat her Diet Sprite all over the floor. Michael didn't move a muscle. When Rockenbach walked away, Lisa said, “How come you didn't react!”

“You can't react,” Michael replied. But he knew exactly how bad this was: Lisa delivering a presentation to the presiding judge in her foreclosure case asserting that unprofessional, clueless magistrates stood mute in the face of widespread fraud.

The co-chairs of the committee told Judge Sasser that Lisa Epstein would be speaking, so that was probably why Sasser never showed. A relieved Lisa gave the presentation, focusing on the lack of verifications as well as fraudulent foreclosure documents. The attendees, including other local judges and an assistant U.S. attorney, made knowledgeable comments. One participant said to Michael, “
It is all about awareness, and then sanctions can and should be applied.”

On June 3 the state supreme court denied Shapiro & Fishman's rehearing on the verification procedure. A couple of days later Lisa was walking into the courthouse as Judge Sasser was walking out. Lisa described it to Michael later as one of the weirder moments she ever experienced, as the
two locked eyes and exchanged looks like they were football quarterbacks from rival high schools.

Lynn Szymoniak helped draft subpoenas for the Jacksonville U.S. attorney's office to trustees like Deutsche Bank. They asked for the mortgage, note, endorsement, assignment, and title policy on the roughly five thousand loans in each trust. Nobody ever wanted to see these files, but it was a critical step in unraveling the scheme. Fabricated foreclosure documents were the cover-up; failing to transfer mortgages to the trusts was the original sin. And Lynn was hearing that the trusts had almost none of the paperwork in their files. Where trustees should have delivered 25,000 documents, they were delivering twelve. Lynn learned through a Bloomberg report that prosecutors in the Jacksonville office interviewed April Charney in connection with the case.
The U.S. attorney told Charney they were working on formal grand jury depositions for employees of Lender Processing Services and DocX.

On June 4 Lynn filed her
qui tam
lawsuit in U.S. district court in South Carolina. Another would get filed in North Carolina, and the two were eventually consolidated. Lynn's lawyers rewrote much of the complaint but used her evidence to allege that the government was defrauded. “
The defendants concealed that the notes and the assignments were never delivered to the MBS trusts and disseminated false and misleading statements to the investors, including the U.S. government,” read the complaint. Government investors paid for the document cover-up so banks could prove standing to foreclose. Other parts of the government paid off mortgage guarantees based on invalid notes and assignments. The heart of Lynn's case was that the industry broke the housing market by screwing up securitization, with the government among those paying the price.

The Justice Department got involved right away, setting up big meetings with fifteen different agencies, including the FBI, the Department of Housing and Urban Development (HUD), the special inspector general for the Troubled Asset Relief Program, and the Federal Housing Finance Administration. Some around the table simply identified themselves as “consultants,” without specifying whom they consulted for. All the prosecutors boasted about their prowess in sending bad guys to jail; Lynn didn't know these people, or whom to believe. But her lawyers were happy, because
Justice Department involvement meant that DoJ would supply the resources for pretrial proceedings.

Lynn's new contacts at Justice asked for her help in drafting confidential information disclosures, or CIDs, which functioned as requests to produce evidence. Justice needed one CID for each of the eighteen defendants in the case. They took hours and hours to draft, and after Lynn submitted them, the team in D.C. would give notes: “Can you pare this down to the thirty most pressing issues?”

Despite these glimmers of progress, at home Lynn was having trouble paying her electric bill. A light fixture in the kitchen let water through when it rained. The air-conditioning was busted. Lynn couldn't afford payments on the condo, and it fell into foreclosure. The complaint, from foreclosure mill David J. Stern, didn't include a verification affidavit, required by the Florida Supreme Court's rules. Lynn contested the nonverified complaint. She now had two foreclosure suits, separate from the criminal and civil cases. And in April, disaster struck. Lynn's daughter, Molly, a freshman at Hofstra University, had a massive aneurysm. The chances of surviving such an event were minimal, but somehow Molly hung on. Lynn would succumb to tears at random moments. The family was fortunate Molly survived, but medical bills ate into their finances further.

Eventually Lynn stumbled into opportunity. A homeowner from New York with DocX documents faced summary judgment, the final step before eviction and sale. He contacted Lynn and asked, “Would you give us an affidavit and be our expert?”

Lynn asked for $300. She built a standard affidavit template, with her name, her legal background and training, her expert witness experience, and links to articles about mortgage securitization and foreclosures. She examined the mortgage assignments and other supporting documents, looking for falsehoods. That wasn't a terribly taxing job; the myriad problems were by now familiar. Lynn would list the errors—robo-signing, assignments executed after the foreclosure filing, whatever—and write, “
For all of the reasons set forth above, I conclude that the Assignments herein are fraudulent.” This wouldn't automatically save someone's home, as Lynn made clear to homeowners. But it was successful enough in raising questions to hold off summary judgment in cases that might otherwise race through the system. After the first affidavit, word got around among
foreclosure defense attorneys, and more requests came in, first from New York and then from Florida. They brought in enough money for Lynn to pay utilities and keep things stable.

The research led Lynn deeper into the bowels of the Great Foreclosure Machine. For an affidavit on a loan from BAC Home Loans, she uncovered several new document shops in Texas. She found a series of trusts from Ace Securities, with documents produced by Ocwen, right in West Palm Beach. So she researched everything Ocwen put out. Each trustee, servicer, “default services” company, and originator led Lynn to a new bounty of documents, and she surfed from one to the next.

Lynn's front room filled with more documents. She took out all the furniture except for the dining table, and piled up the binders. There were collections for each trust and each robo-signer, to easily identify the signature variations. The printer kept running out of ink, prompting more trips to Office Max. Before it finally keeled over, it churned out enough evidence to implicate virtually every low-level signer, supervisor, and executive at every mortgage-related business in America.

Lynn had to keep some research to herself. The bad news about
qui tam
cases, aside from recovering money for the federal government instead of homeowners, was that they were filed under seal. So when she communicated with Damian Figueroa, whom she still technically served as a lawyer, she could not divulge anything about the case. Damian sent Lynn news about a
qui tam
suit filed in Nevada against MERS, the electronic mortgage registry. She played it coy. “Have you been approached by anyone about filing a
qui tam
against Stern and IndyMac? I cannot get anyone interested—but I think they should be interested.”

Damian replied, “You told me to keep it between us. You would be the only person who would take me serious [
sic
] and not think I am nuts!”

“Just so you know that I have
not
filed a qui tam,” Lynn volunteered. It was unclear whether she was referring to a case against Stern or a
qui tam
in general. “So if you are approached, you should consider this. Despite all the hype, no one is beating down doors to help us.”

A week later someone did beat down Damian's door. An attorney in Fort Lauderdale was organizing a class action against Stern. Damian asked Lynn, “He might ask me to be the class rep for it. Does it conflict on anything we plan to do in the future?”

Lynn released Damian from her retainer by replying, “
I cannot get my group to act—please take any opportunity you can to get justice.”

Damian hired Kenneth Eric Trent, an attorney in Fort Lauderdale, and they filed a class action against Stern's law firm.
Kim Miller at the
Palm Beach Post
wrote a big story on it, noting all the backdated and fabricated assignments in Stern cases. Miller asked Judge Meenu Sasser about it, and the judge claimed, “I haven't seen any widespread problem.”
The bloggers were certain that would come back to haunt Sasser.

The suit was the latest in a host of setbacks for Stern, who endured bad press over his waterfront mansion and stable of sports cars, while an old Florida bar complaint over fee-gouging hit the blogs.
Damian's new lawyer, Trent, released a deposition of Shannon Smith, a Stern notary, whose signature, two big looping initials, looked exactly like the signature of her colleague Cheryl Samons.
A separate class action alleged that Stern refused to stop foreclosure on a couple who never missed a payment, instead demanding $17,000 in legal fees. DJSP Enterprises, the firm's publicly traded parent company, was hit with a suit from investors alleging lies about future profits, which exposed ugly secrets like an SEC disclosure in which David Stern insisted that, no matter how hard the government tried to mitigate foreclosures, he would find a “
way to create a profit center.” The controversies hurt the company's referral business, and the stock tanked.

Most damaging to Stern, the Florida attorney general's office was investigating. June Clarkson and Theresa Edwards asked Lynn and Lisa for documents: “Find me fifty backdated Stern assignments,” or “Find me documents where the same person signs for different banks.” Lisa and Lynn busily honored the requests, sometimes seeking help to run searches from local fraud researcher Michael Olenick, Damian, or any visitor to
Foreclosure Hamlet
willing to pitch in. Between that and the paperwork flowing in from homeowners who heard about the investigation, June and Theresa's offices started to look like Lynn Szymoniak's front room, with foreclosure files scattered everywhere.

Tony Webster was one of Lisa and Lynn's unofficial research assistants, a
Foreclosure Hamlet
member from Brevard County, near Orlando. Tony would drop a letter in the mailbox of every new foreclosure victim in his area, urging them to join
Foreclosure Hamlet
and fight their cases. He also
sent daily blog links to his county's clerk of courts, Scott Ellis, highlighting bad assignments and fraudulent notes: “Our public land records are being turned into a public sewer system!” Ellis was not amused, replying, “I'm not an investigative agency. You claim fraud, no law enforcement agency seems interested.” So Tony Webster got law enforcement interested.