How Wall Street's Foreclosure Fraud was Uncovered by Three Ordinary Americans
David Dayen of the Daily Kos recently published a book on the story of three South Floridians and their role in uncovering the largest crime against consumers in American history: foreclosure fraud. Mortgage companies that had no legal right to foreclose properties were found to be responsible for kicking millions of families out of their homes based on falsified evidence, including backdated, forged, and fabricated documents. This systematic fraud, which involved every major bank in the United States, threw a 300-year history of property records law into question.
What is remarkable is that the three individuals who exposed this massive crime were just ordinary Americans – they weren’t real estate experts, had no history of community activism or organizing, and didn’t work for law enforcement or the government. They had no special knowledge or resources at their disposal. In fact, they were an insurance fraud specialist, a car salesman, and a cancer nurse, united by the fact that they were all victims of foreclosure.
So how did they do it? Lisa Epstein, Michael Redman, and Lynn Szymoniak all simply read their mortgage documents carefully, and what they found was plain evidence of massive deceit. Rather than keeping this information to themselves to benefit only their own cases, they proceeded to dig through public records for further proof of their suspicions. As they expected, the problem was pervasive. After finding each other in the comment sections of websites, they banded together to form a movement that would inform the nation of the truth behind the worst economic disaster that the country has faced since the Great Depression.
How Foreclosure Fraud Occurs
Banks are only supposed to extend home loans to those who can afford to pay a mortgage. The mortgage consists of a promissory note and the mortgage itself, which creates a lien on the property in case the borrower defaults on their loan. In order to foreclose on a property after a certain amount of time in default, the lender must hold the promissory note, the mortgage, or both. In the simplest terms, a financial institution cannot foreclose a property if they cannot prove that they actually own the rights to it. It should be clear from the start, and throughout the life of the mortgage, which institution legally owns the mortgage.
The problem began when Wall Street realized how much profit could be made by extending mortgages to people regardless of their ability to pay, and then turning around and selling them to banks who would then form them into mortgage-backed securities. These securities would then further be broken down, sometimes multiple times, until it was no longer possible to figure out who actually owned these loans. The practice picked up so rapidly that it became impossible to track with paperwork, which led to rampant falsifications and forgeries. This “documentation” was then used to illegally foreclose on millions of home loans.
The worst part of this story is that not one executive was sent to jail for their role in bringing the entire economy to the point of collapse, even though the evidence of every illegality committed was overwhelming.
Dayen’s book is entitled Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Greatest Foreclosure Fraud. The book is available for purchase on Amazon.com.