According to a recent report aired on CBS News program 60 Minutes, as foreclosed homes flood the market in the midst of the economic crisis, banks are finding that all too often the ownership documents on these properties are missing. The report says “shortcuts” taken during the heydays of issuing mortgage-backed investments meant that some legal documents behind the mortgages “simply aren’t there.” Reporter Scott Pelley said it appears some lending institutions, desperate to turn over foreclosed properties, are allegedly resorting to forging documents to replace missing paperwork.
The investigative report uncovered evidence of a document mill – possibly one of many – where employees were allegedly paid about $10 per hour to sign false names on “assignment of mortgage” paperwork, posing as bank vice presidents as well as falsely notarizing forms. Former employees interviewed by 60 Minutes said they were required to sign up to 350 documents per hour, often logging as many as 4,000 forged mortgage forms every day for each employee.
A million homes have entered foreclosure since the economic crisis began, and at least another million are expected to be foreclosed on this year. As a result of the massive number of foreclosure lawsuits, once bundled mortgage backed securities are being opened, exposing a lack of ownership documents all across the country, 60 Minutes reports.
CBS News talked to Shelia Bair, former chairman of the Federal Deposit Insurance Company (FDIC). She told reporter Pelley that fraud surrounding these mortgages is “pervasive.” She feels the “rotten mortgage documents” are so dangerous to the economic recovery that the government should require banks to contribute to a massive “cleanup fund,” similar to the funds that are established in response to massive environmental and natural disasters, which would pay homeowners to accept banks’ ownership claims. She estimates this fund would total in the billions of dollars.
According to the 60 Minutes report, all 50 state attorneys general are prepared to seek about $20 billion 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.”