But the reason for these forgeries remained a mystery until today, when an unsealed lawsuit showed that banks forged papers because they never owned the mortgages in the first place.
Banks May Have Forged Documents for Millions of Homes
The recently unsealed lawsuit, which was settled by the banks in 2012 for $95 million, was filed in 2011 by Lynn Szymoniak, a foreclosure fraud expert, on behalf of the federal government and 17 states. The lawsuit named dozens of mortgage servicers as defendants, including major banks like Wells Fargo, Bank of America, and JPMorgan Chase.
In 2009, Szymoniak looked through several mortgage documents after a lender tried to foreclose on her own house, and discovered a shocking pattern of foreclosure fraud. One bank, for example, forged a document claiming it acquired ownership of her mortgage in October 2008, but the bank forgot that it filed foreclosure four months earlier.
And the number of banks looking to retake homes based on mortgages they never owned is alarming. According to sources, tens of millions of mortgages in the United States lack a reliable chain of ownership, which means the foreclosure fraud crisis may continue to grow.
Have You Been the Victim of Foreclosure Fraud?
Every mortgage has two parts: the mortgage itself, which creates a lien on your property, and the promissory note, which is your promise to repay the lender. During the housing frenzy before 2007, mortgages were often packaged together and sold as investments to a long chain of buyers.
But in order for a mortgage transfer to be valid, the note has to be endorsed by the selling party. And the endorsement must happen within 90 days of the transfer. Many banks, however, failed to endorse the notes within this window. To make matters worse, many of the mortgages were never physically delivered, either.
So banks forged documents to prove ownership. And it appears this practice was rampant. If you fear you’ve been a victim of foreclosure fraud, contact a foreclose attorney today to learn more about your legal rights.