WHAT OTHERS SAY: Koster wins small victory for victims of mortgage fraud

Friday, August 17, 2012 | 6:00 a.m. CDT

It's difficult to blame the Justice Department for deciding this week not to file criminal charges against Goldman Sachs, the huge investment bank that helped cause the mortgage crisis that tanked the U.S. economy.

It was an unfair fight from the beginning. Goldman Sachs is lawyered up to the hilt, and politicians in Congress who do Wall Street's bidding won't give federal regulators the money to fight them. Thus the government doesn't have enough leverage to force bad actors to pay for having shorted the U.S. economy.

But ticked-off homeowners in Missouri can find some solace in the fact that Attorney General Chris Koster is making one company pay for its role in the mortgage crisis.

In February, Mr. Koster filed criminal charges against DocX, a unit of Jacksonville, Fla.-based Lender Processing Services, accusing the company and its employees of forgery. As banks were selling overpriced mortgages that left too many homeowners under water (while simultaneously betting that those homeowners would default on their loans), DocX was helping. It was facilitating the fast and furious mortgage loan paperwork that should have been checked, double checked and signed by actual bank officials.

Instead, a DocX employee just forged names on deeds thousands of times that ended up in courthouses all over Missouri and the rest of the country.

Earlier this month, Mr. Koster reached a settlement with Lender Processing Services. It will pay the state of Missouri $2 million and cooperate with Mr. Koster's ongoing investigation of DocX founder and former president Lorraine Brown.

Most of that money will end up in Missouri's general fund, which means it will be available for schools, drought relief or whatever lawmakers decide to spend it on.

It's not a lot of money. It doesn't make up for the fact that Goldman Sachs traders and executives don't have to worry about prison time.

But it's a start. It's a measure of justice against profiteers who made money on the suffering of others.

Copyright St. Louis Post-Dispatch. Reprinted with permission. Questions? Contact Opinion editor Elizabeth Conner.

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Mark Foecking August 17, 2012 | 8:54 a.m.

"As banks were selling overpriced mortgages that left too many homeowners under water"

Aren't the people that bought them just as responsible?

Forging loan paperwork is a criminal offense, and DocX should answer for it. But they shouldn't make it sound like homeowners that bought too much house are innocent victims.


(Report Comment)
Susan Smith August 17, 2012 | 11:16 a.m.

Unfortunately, the federal government refuses to investigate and prosecute fraud in the financial industry at all levels. Indeed, the US Treasury under Tim Geithner set the stage for fraud in the use of TARP funding by ordering banks not to use that funding to shore up the loans already made by the banks (the law's original intent) but to ONLY use it for NEW loans. That led to fraudulent and unethical calling of EXISTING loans without cause, particularly in the commercial real estate and construction loan markets.(See the board minutes of NCC in which that bank was sold to PNC)
Crooked banksters saw the windfall that was being created, and used their exemption from cause to foreclose and sell valuable properties for pennies on the dollar to "asset-holding" companies they and their buddies organized.
One such case is now being investigated by the FBI in St. Louis involving the former president of Natl City in that city and his buddies in over 20 of those asset-holding companies.
The Federal Reserve of St. Louis reported that over 22% of the jobs lost in the 2008 financial crisis were in construction, with many more in related industries of manufacturing, material and equipment supply, and on down to consumer goods. This was the result of the US Treasury's manipulations in favor of the big banks, and it continues today.
The home mortgage market is just a scapegoat. The real story was in the commercial mortgage market, which of course impacts us all.

(Report Comment)
frank christian August 17, 2012 | 11:34 a.m.

Prosecution of Wall Street perps: W. Bush over 1300, Clinton over 1000, Obama 0.

(Report Comment)
Richard Saunders August 17, 2012 | 12:44 p.m.

Wow, what a horribly misleading article, white-washing a white-wash job by AG Koster.

First off, this did NOTHING to help the victims of mortgage fraud. All proceeds went to Jeff City to be funneled through the crony wealth redistribution system they've set up there.

Next, all of those documents were fraudulent not merely because they were all signed by the infamous Linda Green (et al.). They were fraudulent because they were inventing a chain of title that NEVER EXISTED. What this means is that the vast majority of mortgages written in the last 10+ years no longer have a valid deed of trust, because papers were NEVER FILED in any county courthouse upon the note changing hands. Instead it is all illegally "tracked" in MERS (the Mortgage Electronic Registration system (which is nothing but a database)). This is why companies like DocX exist. They create the documentation that should've been written EACH TIME as the note was sold.

But guess what? Those notes were sold to securitization trusts, which packaged them up into securities sold as investments. Not only were they packaged though, but they were sliced into "tranches" of different quality of notes, where the lower quality would suffer mortgage default losses before the higher rated (A level) tranches.

But guess what? Until a mortgage defaults, there is no way of knowing which tranche it should be in, so it is impossible to assign them in advance.

But guess what? Most of these trusts legally had only NINETY DAYS to make this determination and to legally bind them to the trust. So, legally, the trusts never owned the notes, and even if they did, they were never registered with the county assessor.

What does this mean to Mr. and Mrs Homeowner? If your note has been securitized, your chain of title has been destroyed, and there is no legal remedy to re-attach the note to the deed of trust. Basically, there is no entity with legal standing to foreclose on the property, and the mortgage is now an unsecured loan.

Oh, and about that broken chain of title? You can make every single mortgage payment to your servicer, yet still fall victim to illegal foreclosure, because there may be multiple trusts who believe they own your note.

In a nutshell, the securitization process hatched by Wall St./Fannie/Freddie/ and the mafia running Rome on the Potomac removed all fiduciary risk associated with mortgage lending by transferring it the whole of the system instead (aka "tax-payers" and "dollar-holders"). It is this transfer of risk which created the artificial environment of seemingly perpetual rising home prices, which fooled the average person into acting in a manner that in hindsight, looks personally irresponsible.

Worse yet, as noted by Susan, this spurred ever increasing investment in the construction industry until it too, blew up from the lack of sustainable demand, which is the equivalent of urinating on next year's seed corn (to coin a phrase).


(Report Comment)
Richard Saunders August 17, 2012 | 12:45 p.m.

... continued from above ...

So what did we get for this crime? Up to 40M houses no one needs, for starters, and the highest mortgage debt load ever, at prices that will not be seen again for a long time.

This is the wealth transfer mechanism that has looted Main St. and sent it to Wall St., notwithstanding the cut that AG Koster got his hands on.

Now, does anyone expect him to address the chain of title issue, or is his "win" the end of his curiosity on the subject?

(Report Comment)

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