Gretchen Morgenson has a report on San Francisco City Assessor Phil Ting’s analysis of 400 recent foreclosure filings. The investigation revealed that fraud was near-universal:
An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation, according to a report released Wednesday….
The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.
Yves Smith rightly notes that these improprieties aren’t arcane, but “are actually pretty basic to lawyers – you can’t assign rights you don’t possess or sell what you don’t own.”
Ting’s investigation can be added to a short list of actual investigations by public offices that includes Jeff Thigpen in Guilford County, NC and John O’Brien of Southern Essex County, MA. Beyond these officials, reporter Abigail Field also investigated foreclosure documentation in New York for Fortune. But beyond this, there haven’t been substantive investigations of robosigning and foreclosure fraud, particularly by the parties who aim to settle with the nation’s five largest banks (as a gentle reminder, there is no mortgage settlement yet that we know of – the terms have not been released).
More to the point, Ting’s investigation in San Francisco speaks to the need of real investigation of obvious crime. Professor Adam Levitin hits this point hard in a must-read post:
The San Francisco City Assessor’s audit also serves as a benchmark for evaluating the Federal-State servicing settlement. The San Francisco City Assessor managed to accomplish in a few months what the Federal government and state Attorneys General weren’t able to do in nearly a year and a half with far greater resources at their disposal: perform a credible investigation of foreclosure documentation with serious implications about the securitization process in general. That’s a lot of egg on the face of Shaun Donovan, Eric Holder, Tom Miller, et al. The SF City Assessor report shows that it really wasn’t so hard for a motivated party to undertake a serious investigation. And that raises the question of why the largest consumer fraud settlement in history proceeded with virtually no investigation.
The lack of investigation was the compelling criticism that led the NY and DE AGs to stay out of the settlement for quite a while. I’ve never heard an answer as to why no serious investigation. As the SF City Assessor’s audit shows, the documentation is all a matter of public record. It’s not that hard to do, especially if you have the resources of the federal government. So the resources were there. The capability was there. So why no investigation? The answer has to lie with lack of motivation. Were the Feds and AGs scared of what they would find if they delved too deeply into the issue?
Levitin points out that Ting’s investigation goes far beyond transparent robosigning problems and into the depths of the inadequacies and failures of the MERS database of property records. The result is not just confused foreclosure records and fraudulent document filings, but massive amounts of unpaid taxes and filing fees.
Levitin goes on to point out the problem of Too Big To Fail existing as a functional get out of jail free card. But his observations on the lack of investigation and accountability for these giant banks is particularly relevant:
Part of the problem, I think is a social one, as our political leadership is part of the same social milieu as our financial leadership and unwilling to call out criminal acts by their peers.
This is part of the fundamental critique of the Occupy Wall Street movement, namely that financial elites are so close with political elites – often overlapping – that they are able to escape any and all accountability for their actions. Look at the Obama White House and see a chain of Wall Street executives in roles not just connected to the economy, but administration leadership. It’s no surprise that these people in the halls of government don’t prosecute their peers in the private sector.