Great article for lawyers to pay attention to by Neil Garfield

Casablanca Deja Vu: Shocked and Total Disbelief

by Neil Garfield

Maybe it is true that some of the earlier attorneys for the banks were caught by surprise when they learned of fabrication of documents, unauthorized signatures and of course Robo signing. In this case lawyers from the state of Maine face possible discipline for their failure to take appropriate action in over 100 cases. This stems from the revelation that GMAC mortgage have an employee named Jeffrey Stephan, who was signing between 6000 and 8000 legal foreclosure documents per month without knowing anything. His job apparently was simply to sign his name. He wasn't told anything, he didn't see anything, and he never asked anything.  See no evil, hear no evil, speak no evil.

The law firm is Drummond and Drummond.  One of the attorneys for that firm, Paul Peck, testified at a hearing last Thursday that he was completely surprised that Stephan never read the affidavit. The problem for the firm is that they had 100 other cases in which the same employee had executed an affidavit that was being used in litigation. The firm did nothing to inform the court of the potential problem. The Bar Association is accusing the firm of violating its ethics and failing to notify the court in the other cases. There does not appear to be any allegation that the firm was complicit in the filing of a false affidavit. Most people on the foreclosure defense side of these issues believe that lawyers should be disbarred for not only failing to notify the court of the potential problem, but also failing to perform due diligence intentionally to avoid knowing that they were submitting false testimony.

While I agree that the lawyers probably had more than an inkling as to what was going on, it is my opinion that the firm should be put under supervision and probation. We are walking a fine line here and we must be careful what we wish for. Lawyer is obligated to advocate every possible position that might be beneficial to his client. If the lawyer does not absolutely know for sure that his client is lying, I think most people who are engaged in the enforcement of ethics and discipline of lawyers would agree that there is no foul. Those of you who have been represented by counsel in connection with some matter in litigation probably know that there are always more than one interpretation of the facts and always more than one opinion as to which facts are important and which are not. You expect your lawyer to use the things that are most beneficial to your position.

However, that said, I think the attorneys who used those affidavits after hearing the revelation about GMAC mortgage and subsequent revelations are in a different position. For self-preservation alone they had an obligation to inquire. They might face liability for their part in submitting false testimony to the courts of various states. Their insurance company will probably take the position that they were committing an intentional act for the benefit of preserving an extraordinarily large channel of fee revenue.  I think the insurance company would be right. And I think that those attorneys should face harsh discipline.

With all that we know about fraudulent conduct of all of our major financial institutions, which so far has resulted in perhaps $200 billion in settlements, it is hard to imagine why any attorney would not closely scrutinize documents submitted for support of a foreclosure action unless they were intentionally avoiding information that they knew or should have known existed. Of course each such case should be examined separately on its own fact pattern. Not all lawyers work for a foreclosure mill should be subject to major discipline or even investigation. The layering that  occurred on Wall Street was also happening in the foreclosure mills. They were creating imaginary lines so that they could throw the junior associates under the bus if the truth was exposed. I would advocate that the junior associates should be given immunity from prosecution and that the  discipline should be directed at the managing partners who were aware of the issues.

Maine Lawyers in Foreclosure Mill Face Discipline

 Of course all of this is just a distraction from the main question, to wit: why was it necessary to fabricate documents, commit perjury, and create all of this layering if the loans were actually enforceable?

My answer is the same as the allegations made by the investors who thought they were buying mortgage bonds, the insurers who thought that they were paying broker-dealers who had a loss, and the guarantors who thought that they were paying broker-dealers who had a loss. They are all claiming (in an out-of-court) that the broker-dealers committed fraud and mismanagement of money.

In plain language they are alleging that the investment banks (broker-dealers) stole the money that was intended to be invested in the trusts. They are alleging that the investment banks created a web of controlled companies that served as sham originators  on loans that were made using the money that investors advanced for the purchase of mortgage bonds issued by a REMIC trust that turned out to be unfunded and without any assets or income.  They are alleging that the mortgage documents are unenforceable.  Don't take my word for it ---  you can Google up the complaints and read it for yourself.

It must be fair to assume that the investment banks would not pay $200 billion unless they were saving themselves from liability for much more than that. It is also fair to assume that the settlements with the investors reduced the loss of the investors.  Therefore is also fair to assume that any demand for payment that does not reflect a reduction in principal (and therefore a reduction in interest) is wrong. Any notice of default would similarly be defective and so would the notice of acceleration. Any lawsuit were nonjudicial foreclosure  would also be defective. The parties involved have actual knowledge of both the documentary problems outlined in the case above in Maine and the money problems that have been announced with great fanfare.

So the question is why isn't the borrower getting credit on the loan account when these settlements occur and can be allocated to the loan account?  If the actual creditor has experienced a reduction in the account receivable, what is the basis for allowing anyone to claim that the full amount is still due?

And that leads to my final question of the day, to wit: why would anyone try to claim that the full amount is due and enter into needless litigation?  I can think of no answer other than pure greed and the failure to present this question properly  in a court of law.