Mortgages mean NOTHING

In an unsealed lawsuit, it was discovered that banks resorted to faking documents in order prove true ownership of the homes they were trying to foreclose on.

This means that millions of mortgages in the U.S. lack a legitimate chain of ownership. The 2011 lawsuit was filed in a U.S. District Court in both North and South Carolina by a white-collar fraud specialist named Lynn Syzmoniak.

28 banks, mortgage servicers, and document processing companies were named in the suit including JPMorgan Chase, Wells Fargo, Citibank, and Bank of America.

Syzmoniak researched her own mortgage documents in 2009, finding the company that claimed ownership over her mortgage didn’t have ownership until 4 months after filing for foreclosure. Eventually, she examined thousands of documents, piecing together the entire scheme.

Mortgages exist in two parts: the promissory note, which acts as the IOU from the borrower to the lender and the mortgage, which creates the lien on the home in case the loan is defaulted.

Banks purchased loans from originators and then in a process known as securitization enacted a series of transactions that pooled thousands of mortgages into bonds, sold all over the world as public pension funds to investors.

A trustee would then pool the loads and sell the securities to investors, and then the investors would get an annual percentage yield on their money.

In order for the process to work, banks would physically put the promissory note and mortgages into the trust. The note would have to be endorsed and hand it over to a document custodian for the trust with a “mortgage assignment” confirming the transfer of ownership.

All of this had to be done before a 90-day cut off date that had no grace period. According to Georgetown law professor Adam Levitin:

“If mortgages were not properly transferred in the securitization process, then mortgage-backed securities would in fact not be backed by any mortgages whatsoever.”

The lawsuit alleged that these notes as well as the mortgage assignments were never delivered making ownership of the mortgage impossible to establish, if the banks owned the homes to begin with.

After realizing proof of ownership could not be provided, the banks then forged several documents to establish ownership and were caught red handed.

The banks settled out of court for a paltry $95 million dollars, which is nothing compared to the damages they caused to families around the country.