As if the country needed more proof of the outlaw behaviors of banks and their agents, The Baltimore Sun's Jamie Smith Hopkins reports that 1,000 or more Maryland deeds are likely forgeries, created by a foreclosure mill. A former notary from law firm Shapiro & Burson filed an affidavit with law enforcement and regulators charging that the attorneys' signatures on the deeds and other important documents were forgeries signed at the express direction of management. The affidavit attached sample signatures.
If the forgery claims are true -- and that's not much of an "if" -- the false deeds cloud the properties' titles, creating a nightmare for the innocent people who bought the homes after they were foreclosed upon.
This isn't the first time this has come up in Maryland: Last year, two other law firms in the state, Bierman Geesing & Ward and Covahey Boozer Devan and Dore, admitted that they had forged signatures on foreclosure documents in a similar manner. And Baltimore firm Friedman & MacFayden is being investigated for similar allegations, the Sun reports. At this rate, the title issues in Maryland could prove to be as tragic in scope as those in Florida.
A Nationwide Fraud Problem
But it's not just a Maryland issue. Evidence of the same illegal practices has surfaced in Pennsylvania. Given the speed-over-substance approach applied nationally to foreclosures, and the volume of foreclosures processed by foreclosure mills, surely the problem extends across the country, and the fraud will likely be found to have been going on for at least the last few years. So we're bound to see a storm front of clouded titles develop and spread across the land, above and beyond the title issues caused by MERS.
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Both problems are a direct consequence of cost-cutting efforts at big, supposedly massively profitable banks. That's both tragic and ironic, given that America's previously-rock solid private property rights system underpinned our prosperity -- the prosperity that allowed the big banks to grow in the first place.
Confusingly, the government is reportedly nearly ready to allow the big banks to pay big dividends again. This is a terrible idea. Before a dime goes to shareholders, the state and U.S. attorneys general, federal regulators, and others working to settle the mortgage mess need to cordon off enough cash to pay for all the damage the banks' cut-rate policies and illegal practices have created. The government didn't hesitate to raise a similar concern about BP's assets in the wake of the Gulf of Mexico oil spill. But we know from the State of the Union speech that Big Oil isn't particularly popular in Washington, D.C., at the moment. Is Big Finance really so beloved that the government will let these companies distribute assets that surely will be needed to repair the damage their actions caused?
To put it another way: How can "stress tests" show the banks are sound enough to pay dividends when the costs of hiring the employees necessary to carry out even the most minimal settlement the government and regulators could accept would be massive, the potential bill from mortgage mess litigation continues to grow, and any penalty associated with a settlement has the potential to be "material" according to the banks themselves? Whether or not the banks are allowed to start paying dividends is going to be a big tell about how forcefully the government plans to bring the banks to heel. Another big tell will be whether criminal indictment come soon: The blog FireDogLake shows how easy such indictments would be to bring.