"Bottom Of The Barrel" Has Not Yet Been Reached, Says Bankruptcy Judge In Slamming Mortgage Servicing Fraudsters Filing "Sham" Foreclosure Affidavits

In New Orleans, Louisiana, Housing Wire reports:

• The U.S. Bankruptcy Court for the Eastern District of Louisiana will sanction Lender Processing Services after an employee at the firm was found to have improperly signed a court affidavit that put a nondefaulted borrower in line for foreclosure.
• Ron and LaRhonda Wilson were current on their mortgage and making payments under a court-approved Chapter 13 bankruptcy plan when Option One Mortgage Co., their mortgage servicer, attempted to foreclose in early 2008 by filing a series of motions with the court.
• The U.S. Trustee, a U.S. Department of Justice unit responsible for overseeing the administration of bankruptcy cases, eventually intervened in the dispute and last December asked the Louisiana court to sanction LPS for what it said was the firm's misrepresentation of payments received, but not properly posted to the borrower's account.
• U.S. Bankruptcy Judge Elizabeth Magner ruled in an order entered last week that the affidavit of indebtedness an LPS employee signed on behalf of Option One, attesting to the debt owed and alleged nonpayments, was a fraud on the court.

***

• "The affidavit is typical. It purports to be executed under oath before a notary and two (2) witnesses," Magner said in her ruling. "It provides the name and title of the affiant and represents that the affiant has personal knowledge of the facts contained in the affidavit. In fact, it is a sham."
• LPS officers executed 1,000 documents per day for Option One and other clients, and testified that each day [LPS' robosigner Dory] Goebel received roughly 30 documents to sign, according to court documents. Ms. Goebel allocated two hours per day for "document execution" and she estimated in her testimony that it took her between five and 10 minutes to sign each one, reviewing the computer record of those payments posted.
• The judge characterized Goebel as an "earnest young woman but with no training or experience in banking or lending" for her job and title of "assistant secretary." Goebel admitted she would have signed the affidavit, even if she knew of the unposted payments, without questioning it because her signature was requested by legal counsel at The Boles Firm.
• "It is evident that LPS blindly relied on counsel to account for the loan and all material representations. In short, the affidavit was nothing other than a farce and hardly the evidence required to support relief," Magner wrote in her ruling.
• Magner said default affidavits were meant to be a lender's representation to the court of the status of the loan and were accepted routinely in state and federal courts in lieu of live testimony. "They are an accommodation to the lending community based on a belief by the courts that the facts they present are virtually unassailable. The deference afforded the lending community has resulted in an abuse of trust," Magner wrote.(1)

***

• In her ruling, Magner suggests that such shortcuts were rampant across an entire industry. "The fraud perpetrated on the court, debtors and trustee would be shocking if this court had less experience concerning the conduct of mortgage servicers. One too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry," Magner said in her ruling.
• "With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality."

For more, see Tech snafu, improper foreclosure affidavit lead to sanctions for LPS.

For Judge Magner's ruling, see In re Wilson, Case 07-11862 (Bankr. E.D. La. April 6, 2011).

For additional background information on this case, see DailyFinance: When Banks Outsource Foreclosures, Nothing Good Happens:

• It's a Louisiana bankruptcy case involving a single foreclosure that best illustrates the problems with the banks' outsourcing their mortgage default work to LPS or similar entities.

***

• In that Lousiana case, involving the bankruptcy of Ron and La Rhonda Wilson, LPS is facing sanctions for allegedly committing perjury during a hearing held to find out why the bank -- Option One -- twice asked the bankruptcy court for permission to foreclose when the debtors were current on their mortgage.

(1) Judge Magner continued with this observation on the loan servicer's abuse of trust:

• The abuse begins with a title. In this case, Ms. Goebel was cloaked with the position of "Assistant Secretary,” in a purposeful attempt to convey an experience level and importance beyond her actual abilities. Ms. Goebel is an earnest young woman, but with no training or experience in banking or lending. By her own account, she has rocketed through the LPS hierarchy receiving promotions at a pace of one (1) promotion per six (6) to eight (8) month period. Her ability to slavishly adhere to LPS’ procedures has not only been rewarded, but has assured the development of her tunnel vision. Ms. Goebel does not understand the importance of her duties, and LPS failed to provide her with the tools to question the information to which she attests.

***

• In this case the lender and LPS cloaked Ms. Goebel with a title that implied knowledge and gravity. LPS could have identified Ms. Goebel as a document execution clerk but it didn’t. The reason is evident, LPS wanted to perpetrate the illusion that she was both Option One’s employee and a person with personal and detailed knowledge of the loan. Neither was the case.