Scott Pelley: If there was a question about whether we’re headed for a second housing shock that was settled last week with news that home prices have fallen a sixth consecutive month. Values are down nearly to the levels of the great recession. One thing weighing on the economy is the huge numbers of foreclosed houses. Many are stuck on the market for a reason you wouldn’t expect. Banks can’t find the ownership documents. It’s bazar but it turns out that “Wall Street” cut corners when it created those mortgage backed investments that triggered the financial collapse. Now the banks want to evict people their unwinding these exotic investments to find that often the legal documents behind the mortgages aren’t there. Caught in a jam of their own making. Some companies appear to be resorting to forgery and phony paper work to throw people down on their luck out of their homes. In the 1930’s we had bread lines, venture out before dawn in America today and you find mortgage lines.
Video: This folks on the street are homeless. They slept on the side walk because they want to keep their homes. Facing foreclosure they camped out in January to get in line to beg their banks for lower payments on mortgage. So many in the country are desperate now that they have to meet in convention centers coast to coast …. …… This was Los Angeles where 37000 home owners gathered and this was Miami in February, where the worry was visible and shared by 12000 more. The line went down the block and doubled back twice. “Dale Defreetis” lost her job and now she fears her home is next.
Dale Defreetis: It’s very emotional because I just think about it that I don’t want to lose my home, I really don’t.
Scott Pelley: It’s your American dream
Dale Defreetis: It was and it still is.
Scott Pelley: These convention center events are put on by the nonprofit neighborhood assistance corporation of America which helps people to figure out what they can afford and then walk’s them across the hall to bank’s representatives to ask for lower payments. More than half will get their mortgage is adjusted. But the rest discovered that they just can’t keep their homes and for many that’s when the real surprise comes in. Turns out these Banks which demand borrowers have all of their paper work just right. These same banks have fouled up their own paper work to a historic degree.
Linn Simone: In my mind this is an absolute intentional fraud.
Scott Pelley: “Lin Simone” is fighting foreclosure and while trying to save her house she discovered something we did not know. Back when Wall Street was using algorithms and computers to engineer those disastrous mortgage backed securities, it appears they didn’t want old fashioned paper work slowing down the profits. This is back when it was a white hot fever pitch to move as many of these as possible.
Linn Simone: When you could make a whole lot of money through the securitization and every other aspect of it could be done electronically, keystrokes this was the only piece where somebody was supposed to actually go get the documents transfer the documents from one entity to the other and looks very much like they just eliminated that step all together.
Scott Pelley: Simone’s mortgage had been bundled with thousands of others into one of those wall street securities traded from investor to investor. When the Bank took Simone act to court it first said that it had lost her documents including the critical assignment of mortgage which transferred ownership. But then there was a court house surprise….
“They found all of your paper work more than a year after they initially said that they had lost it. Did that seems suspicious to you?”
Lind Simone: Yes absolutely! You know, what you imagine they fell behind the file cabinet? Where was all of this? We had it, we own it, and we lost it and then more recently everyone is coming in saying, hey we found it. Isn’t that wonderful?
Scott Pelley: But what the bank may not have known, Is Linn Simoniac is a lawyer and fraud investigator with the specialty in forged documents. She has trained FBI agents.
Video: “Did you ask for copies loose documents?”
Lind Simone: Yes.
Video: And what did you find?
Lind Simone: When I looked at the assignment of mortgage, and this is the assignment of copy for my case, I looked at even the date they put it in, which was 10/17/2008, was several months after they sued me for foreclosure. So what they were saying to the court was we sued her in July of 2008 and we acquire this mortgage on October of 2008 and made absolutely no sense.
Scott Pelley: Curious she used her legal training to go online and researched 10000 mortgages.
Lind Simone: Then I began to find the strange signatures.
Scott Pelley: One of the strangest signatures belonged to the banks vice president who signed Simoniac’s newly discovered mortgage documents. The name is Linda Green. But on thousands of other mortgages the style of Green’s signature changed a lot and even more remarkable Simoniac found that Linda Green was vice president of 20 banks all at the same time.
Lind Simone: She is vice president of 20 banks and all of this at the same time, and all of at the same week.
Scott Pelley: Where did all those document come from? We went searching for the Linda Green and we found her in Georgia. She told us she is never been a bank’s vice president. In 2003 she was a shipping clerk for auto parts, when her grandson told her about a job at a company called DOCX. DOCX once housed here in Alpharetta, Georgia was a sweat shop for forged mortgage documents.
Lind Simone: They were sitting in a room signing their name as fast as they possibly could to any kind of nonsense document that was put in front of them.
Scott Pelley: DOCX, and companies is like it, were re-creating missing mortgage assignments for the banks and providing the legally required signatures of bank vice presidents and notary’s”. Linda Green said she was named to bank vice president by DOCX because her name was short and easy to spell. As demand exploded DOCX needed more Linda Greens.
“So you are Linda Green? ‘Yes’”
Chris Pently worked at DOCX at the same time and signed as Linda Green.
Scott Pelley: When you came in to DOCX on your first day, what did they tell you your job was going to be?
Chris Pently: I was going to be signing on documents for using someone else’s name.
Scott Pelley: Did you think there was something strange about that in the beginning?
Chris Pently: Yes. Seemed a little strange but they told us and they repeatedly told us that everything was abovd board and was legal.
Scott Pelley: And your previous experience in banking?
Chris Pently: None.
Scott Pelley: And legal documents?
Chris Pently: None.
Scott Pelley: There really were no requirement for the job?
Chris Pently: correct.
Scott Pelley: You had to be able to hold a pen?
Chris Pently: Hold a pen.
Scott Pelley: But you are signing this documents as if you are an officer of the bank?
Chris Pently: Correct
Scott Pelley: How many banks were you Vice President of in a given day?
Chris Pently: I would guess somewhere around 5 to 6
Scott Pelley: What you getting paid for this?
Chris Pently: I’m embraced to say $10 an hour.
Scott Pelley: $10 an hour! That’s not much for a guy who is vice president of five banks.
Chris Pently: Yeah, I was very underpaid for my status in the companies.
Scott Pelley: Pently showed us how he signed mortgage documents as Linda Green. He told us that docs employees had to sign at least 350 an hour. Pently estimates that he alone did 4000 a day. This is also Linda Green, Shewanna Crite worked at DOCX and says she both signed and notarized the mortgage documents. What is the role of the notary?
Linda Green: We were to make sure that everyone on the document was who they said they were and notarized the documents.
Scott Pelley: But the people who were signing the documents weren’t who they said they were.
Linda Green: Right
Scott Pelley: So if Chris Pently was signing for Linda Green you’d notarized the documents?
Linda Green: Yes.
Scott Pelley: And you were told that was ok.
Linda Green: Yes.
Reporter: What you know now?
Linda Green: That was not right.
Scott Pelley: The real Linda Green didn’t want to be interviewed. But she said that some of the bank’s vice presidents at DOCX were high school kids. Their signatures were entered into evidence in untold thousands of foreclosure suits that sent families packing.
Lind Simoniac: So it was a common practice in the last few years to flood the courts with these documents.
Scott Pelley: And look at some of the junk the courts were flooded with. Sometimes the document mill didn’t even bother to fill in the name of the supposed owners to them it seemed like a joke.
Scott Pelley (Voice): Instead of the name of the bank here that was acquiring the loan this one says bogus assignee for intervening assignments that’s who acquired this loan.
Scott Pelley: This was an actual document that was in litigation?
Lind Simoniac: Yes and what corporation assigned this loan? A corporation identified as a bad beanie. Excuse me when I saw that I was just absolutely amazed.
Scott Pelley: What does that mean a bad beanie?
Lind Simoniac: It could possibly mean a bad beneficiary. I’ve no idea what they meant. So here’s the same woman Linda Green and this time instead of being a vice president of American home mortgage servicing she’s vice president of a bad beanie.
Scott Pelley: Simoniac says that the bank whose paperwork was handled by the DOCX forgery mill included Wells Fargo, HSBC, Deutsche Bank, Citi Bank, US Bank and Bank of America. We contacted all of them in and each said that it farmed out its mortgage servicing work to other companies and it was those mortgage servicing firms that hired DOCX. DOCX was owned by a company called LPS a two billion dollar firm that calls itself the nation’s leading provider of mortgage processing services. LPS told us that when it found out about the phony signatures in 2009 it shut DOCX down. The FBI and several states are investigating. There were a million foreclosures last year and there will be another million this year. Those lawsuits are forcing open those bundled mortgage-backed securities that Wall Street cooked up in the mid-2000s’ and they’re exposing a lack of ownership documents all across the country.
Government Top Banking Regulator: It’s astonishing to me that this became as persuasive as a problem at that it is.
Reporter: It got sloppy.
Government Top Banking Regulator: It got very sloppy.
Reporter: Sheila Baer is one of the government’s top banking regulators as chairman of the Federal Deposit Insurance Corporation
Reporter: You just described it as pervasive?
Government Top Banking Regulator: It is pervasive. It absolutely is pervasive and it’s just a matter of cutting corners not spending enough money not have any quality controls.
Reporter: Incompetent banking back then is causing foreclosure ghettos today. Although banks say the courts have been accepting their paperwork, now that’s changing as desperate homeowners countersued the banks over the document fiasco. This leaves houses unsold indefinitely undermining the recovery.
Government Top Banking Regulator: I’m very worried about if this starts getting out of hand the kind of impact it will have.
Reporter: These are lawsuits by homeowners.
Government Top Banking Regulator: Yes.
Reporter: Who are being foreclosed upon saying.
Government Top Banking Regulator: Yes, or in the process of being foreclosed
Reporter: How big an issue is that gonna be there 30000 today?
Government Top Banking Regulator: Well, I think this litigation could easily get out of control and we would like to get ahead of it but are feeling we are falling behind it.
Reporter: Chairman Baer thinks rotten mortgage documents are so threatening to the economy that the government should force banks to pay into a massive fund but you think there needs to be a cleanup fund just like a natural disaster?
Government Top Banking Regulator: Yes, something like that. Yes this is one of the making but yes.
Reporter: You don’t want to give an exact dollar amount for this cleanup fund but what we’re talking about is it billions
Government Top Banking Regulator: Billions. Yes absolutely.
Reporter: Billions of dollars. Chairman Baer proposed cleanup fund would pay homeowners to accept a bank’s ownership claim without a lawsuit. She says that this could be cheaper for the banks than trying to recreate the missing documents legitimately and not through the document mills.
Government Top Banking Regulator: I think eventually the bank could provide who owned it but it would take a lot of time and expense.
Reporter: You know none of the major banks were willing to sit down with us and talk to us about this. Not even the American Bankers association.
Government Top Banking Regulator: I’m sorry to hear that.
Reporter: What you think that is?
Government Top Banking Regulator: They’re feeling very defensive now and so I can only assume that is the reason why they declined.
Reporter: The banks are defensive because all 50 state attorneys general want to punish them. The states are seeking about twenty billion dollars in damages for what they say is the irresponsible perhaps criminal way that some mortgage companies handled, what is for most folks, the most important investment of their lives.
“Do you know who really owns your mortgage? To learn more go to 60 minutes overtime dot com sponsored by Lipitor.