fresh voices from the front lines of change







A month ago, President Barack Obama vetoed a bill that would have made it far more difficult for borrowers to prove that banks were engaging in foreclosure fraud. The bill was a complex, highly technical bailout for megabanks that have defrauded millions of borrowers, flaunted the rule of law and and driven our economy off a cliff. The legislation passed both houses of Congress quietly and without much attention, but once consumer advocates sounded the alarm, Obama rejected the legislation, and the bill appeared dead.

Not anymore. Despite widespread public anger and presidential rejection, the House will vote on the issue again today in an attempt to override Obama’s veto. The legislation was reintroduced by Rep. Bobby Scott, D-Va. The bill would require every state to accept notary signatures from any other state. This essentially defeats the purpose of notarization itself, since a notary is supposed to attest to having first-hand knowledge of a specific case. If two parties sign a mortgage contract in Ohio, a notary from New York probably wasn’t there to watch it happen.

In foreclosure fraud, this is important because banks are robo-signing documents in order to cover-up problems with their loan documentation. In the GMAC scandal that ignited the recent controversy, a robo-signer named Jeffrey Stephan had hundreds of thousands of these documents notarized in Pennsylvania, even though they concerned foreclosure cases all over the country. If courts have to accept out-of-state notarizations, it becomes much more difficult to demonstrate that GMAC is committing rampant fraud.

The bill would also allow notaries to sign-off on electronic documents– something that also defeats the basic purpose of a notary. A notary is essentially a credible witness, but if they can sign off on electronic documents, they don’t have to be present at the signing of documents to collect fees. Somebody can forge a document, scan it into a computer, and ship it off to a notary for approval, replicating the GMAC scam online. Banks have been using electronic tricks to get around technicalities like “signatures” on “contracts” of late– they scan a signature from one document and electronically copy it to others.

I don’t have much more to say about this issue than I did in October. It’s despicable for Congress to be contemplating a bailout like this for openly criminal activity.

Policymakers in Washington, D.C. are moving all over the place on the foreclosure crisis. Yesterday, key officials from Bank of America and JPMorgan Chase were grilled before the Senate Banking Committee. Consumer advocates and academics repeatedly caught the bank officials lying or misleading Senators about the way banks treat borrowers, and the incentives currently in place that encourage banks to illegally foreclose on borrowers. Committee members clearly wanted to appear angry– Sen. John Tester, D-Mt., even said “some heads will roll” when he heard that banks actually encouraged borrowers to miss payments in order to qualify for loan modifications. This kind of thing happens all the time, and once the borrower actually misses a payment– after being encouraged to do so by the bank– the borrower gets foreclosed on.

But at the same time, the Federal Reserve is pushing a new regulation that would effectively strip borrowers of their only federal remedy to fight illegal predatory lending. Now the House is considering bailing out Wall Street again, directly on the backs of the borrowers they’ve defrauded. We’ll be counting the votes.


Rep. Scott’s PR guy just told me the Congressman just happened to be around to make a procedural vote. He says Scott “was in the wrong place at the wrong time” and does not support the legislation. David Dayen at Firedoglake argues that this entire reconsideration of the bill is likely a separation of powers dispute between Congress and President Obama regarding the technical procedure Obama used to veto the bill. The legislation may not even come up for a vote. Or it might, for separation of powers purposes, and the result might be bad.

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