Thursday, March 7, 2013
WHISTLEBLOWER: WELLS FARGO FABRICATED AND ALTERED MORTGAGE DOCUMENTS ON A MASS BASIS
Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.
The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.
Wells Fargo’s own actions say the reverse. It has been doctoring documents in house for over fifteen months for borrowers who are targeted for foreclosure. It was having this sort of work done outside the bank for an unknown period of time prior to that.
A contractor who worked at a Wells Fargo facility in Minnesota reports that the bank engaged in systematic, large scale alteration of mortgage notes and fabrication of related documents in preparation for foreclosure. The procedures the bank used are questionable for a large portion of the mortgages.
A team of roughly 100 temps divided across two shifts would review borrower notes (the IOU) to see whether they met a set of requirements the bank set up. Any that did not pass (and notes in securitized trusts were almost always failed) went to another unit in the same facility. They would later come back to the review team to check if the fixes and fabrications had been done correctly.
Not only is having Wells Fargo tamper with documents in this way dubious in many cases (more detail on that shortly), but amusingly, the bank does not even appear to be terribly competent at this sort of falsification. The bank changed procedures frequently, and did not go back to redo its prior work. In addition, it regularly took loans that appear to have been endorsed properly and changed them as well. Finally, even if the procedures had been proper, the temps were required to meet such aggressive production timetables and were so laxly supervised that it seems unlikely that their work was done well.
This account confirms what foreclosure defense attorneys have reported for some time: that servicers have been engaging in document fabrication for some time. It’s not uncommon for a servicer or foreclosure mill to present “tah dah” documents that miraculously remedy the problems that homeowner attorneys have raised, sometimes resulting in clear proof of fabrication, like two different notes (borrower IOUs) having been presented to the court, each supposedly an original.
But what is striking about this practice is both the brazenness and the scale. Our source was told that Wells Fargo added a second shift to its mortgage doctoring operation in November 2011; he* did not know when it had been established. Bank employees claimed that these operations had formerly been done by outside firms and the cost of doing it in-house was 1/20th the former cost. Apparently having plausible deniability was too expensive.
We sought comment from Wells Fargo on these allegations and they declined to respond.
DESCRIPTION OF MORTGAGE DOCTORING OPERATIONS
The document fixing took place at 1000 Blue Gentian Road in Eagan, Minnesota, which the whistleblower described as an enormous facility, and ironically, one at which one of the 9/11 hijackers received flight training.
The whistleblower worked with a team of 50-60 temps, one of the two shifts involved in checking documents before and after the “corrections” were made. The temps came via agencies, were required to have a college degree and pass a security clearance, and were paid roughly $13.00 to $14.50 an hour for eight hours (seven hours of work + breaks). The whistleblower said very few people (under 20%) had prior experience with mortgage documentation. Since Wells has a long-standing practice of promoting temps into permanent positions, the workers had a strong incentive to perform well. Our source worked for the bank for nine months.