Chain of Title (27 page)

On June 7, 2010, Cox arrived at the law offices of Lundy Flitter Beldecos & Berger in Narberth, Pennsylvania, for the deposition. GMAC didn't even have a lawyer attend; she was conferenced in on the phone, with a local attorney standing in her place. Despite the Ice deposition, Cox thought GMAC seemed remarkably unprepared for his questioning. During the ninety-minute interview, Cox steered the same path as Chris Immel, getting Stephan to admit he signed up to ten thousand documents a month without personal knowledge of anyone's case; nor did he or his document execution team check the physical data for accuracy. “
I compare the principal balance. I review the interests. I take a look at the late charges,” Stephan said. “That's about it.”

“So is it correct that you do not know whether any other part of the affidavit you sign is true?”

“That could be correct.”

Cox raised his voice a little. “Is it correct?”

“That is correct.”

After GMAC's representative left the room, Cox asked the court reporter if he could get a rush copy of the transcript within two days. “It'll cost you $300,” the transcriber said.

Cox passed that transcript to several lawyers, including Jim Kowalski and the Maine attorney general. The transcript wound up on April Charney's
listserv, where Matt Weidner found it.
He posted the Stephan deposition on his site on June 15, eight days after it was taken.
Michael Redman saw it and cross-posted it at
4closureFraud
.

Shortly thereafter, Cox got a call from a tall-building lawyer newly attached to the Nicolle Bradbury case. The TBL angrily questioned how the Stephan deposition got leaked to websites. “I don't have to tell you anything,” Cox said. GMAC never called Matt Weidner and demanded he take it down; if they did, he would have told them to fuck off. But GMAC did attempt to block public release of the transcript and to sanction Cox for “malicious dissemination.” Cox counterfiled to dismiss the case based on fraud. “
When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn't,” Cox wrote in his motion. “When he says that he has custody and control of the loan documents, he doesn't. When he says that he is attaching ‘a true and accurate' copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits.”

GMAC “replaced” the Stephan affidavit with a new one. And the TBLs had one response: Nicolle Bradbury didn't pay her damn mortgage. But Judge Powers ruled against the TBLs. Even the new affidavit was flawed; it didn't include the street address of the home, among other inaccuracies. And GMAC's practices irked the judge. “
The Court is particularly troubled by the fact that Stephan's deposition is not the first time that GMAC's high-volume and careless approach to affidavit signing has been exposed,” Judge Powers wrote, referring to both Jim Kowalski's case and Ice Legal's Stephan deposition. “It is well past the time for such practices to end.”

Judge Powers vacated the summary judgment with prejudice. He told GMAC to pay $27,000 in attorney fees. He wouldn't force a takedown of the transcript, because the Ice Legal deposition was on the Internet anyway. And GMAC must have gotten plenty nervous. Several other GMAC cases in Cox's office settled quickly. Michael started seeing multiple users from GMAC spending hours on
4closureFraud
, reading everything GMAC-related on the site. Then Lisa discovered Florida Default Law Group withdrawing a series of affidavits of indebtedness, all of them signed by Jeffrey Stephan. The notice of withdrawal spelled it out:
FDLG “has recently been notified that the information in the affidavit may not have been properly verified by the affiant.” Lisa posted this at
Foreclosure Hamlet
and reported
it to June and Theresa at the state attorney general's office. They asked for all of Lisa's Stephan-related documents.
Lisa put out an APB to her network and collected sixty-nine documents in a few days.
As Lynn was searching, she found a mortgage assignment Stephan had signed on
her own condo
, a document she'd never seen before.

On September 20, 2010, Michael and Lisa were trying to find shelter for
Ramsey Harris, a sixty-two-year-old disabled vet evicted from his rental home in Rocky Point, Florida. Harris was initially told he could stay in the foreclosed home while he set up financing to buy it from the bank. But suddenly the bank informed him on Tuesday he would be evicted on Thursday, and subsequently threw all of Harris's belongings on the side of the road in the rain.

Michael was furious. He looked into every aspect of the case. The foreclosure was fraudulent; Harris lived in the property but never received a summons, a violation of state law. The assignment of mortgage was dated six months after the suit was filed from Bear Stearns, which had already collapsed.
Liquenda Allotey, a known robo-signer, affirmed the assignment, but the signature differed from other Allotey signatures. Michael and colleagues exchanged dozens of emails, trying to get Harris a place to stay and legal representation. But while Michael was working so diligently on Ramsey Harris, the thing he'd been trying to provoke for over a year dropped:
GMAC announced a suspension of all its foreclosures in twenty-three judicial foreclosure states while they investigated the faulty Stephan affidavits.

Lisa was having her car serviced when she gazed up at the TV screen in the lobby. “GMAC Moratorium on Foreclosure Sales,” read the headline on CNN. At that instant, Michael called her cell phone. “This is it!”

Robo-signing was just one cover-up for the banks' lack of standing to foreclose. But Lisa and Michael believed this was finally the crowbar in the window. So many media outlets declined to publish their claims because the banks never admitted to problems. Now GMAC admitted it. Lisa tested her newly serviced car engine by speeding home. She and Michael planned to bombard the media with links to their evidence. But before they could, the media started contacting them. The
Financial Times
asked Michael questions for a story.
So did a reporter for the
Washington Post
, who visited Stephan's house to ask him about the charges (Stephan “said only ‘No,
thanks' before retreating inside”). Local media already valued them as a source:
Paola Iuspa-Abbott of the
Daily Business Review
ran a profile two weeks before, with a picture of Michael and Lisa, arms folded, on the rooftop of the courthouse. Now the national media were following suit.

Eight days after GMAC's announcement,
4closureFraud
posted video of
Jeffrey Stephan's Ice Legal deposition. Viewers were shocked to see Stephan dressed for legal testimony in a black heavy metal T-shirt and jeans, with spiky blond hair and a chin-strap beard completing the look. Matt Taibbi wrote that Stephan looked like “
an advanced-age Beavis or Butt-head.” Toward the end of the video, Stephan burst out laughing; he later made a paper airplane and sailed it toward the camera. Commenters at various sites that cross-posted the video were horrified. “
That can't be real,” one exclaimed.

It wasn't real. Lisa Epstein played Jeffrey Stephan; Michael Redman played the lawyer asking questions off-camera. They shot it at Carol Asbury's office, the one with the telemarketers on the first floor. Lisa was getting into costume in the bathroom when one of the telemarketers came in, took one look, and helped her put on the chin-strap beard. Lisa couldn't hold character by the end, her loud cackle reverberating off the walls. But despite how farcical it looked, the deposition initially fooled everyone.

Lisa and Michael weren't just beating the banks; they were having more fun.

“How do we keep this momentum going?” Lynn wrote to Damian, Nye, Lisa, and Michael the day after GMAC's announcement.

Michael replied: “Keep republishing the most relevant articles that we already have. It is all there. We just need to lead them to it. We have been preparing for this moment for a year.”

The first thing Michael reposted was a deposition from a Chase Home Finance employee named Beth Cottrell, adding the line, “
This deposition is even better than Jeffrey Stephan's depo.”

Chase's downfall tracks back to Nye Lavalle. In 2009 he shuttled between south Florida and Savannah, Georgia, working with a woman battling foreclosure on several vacation properties. He would write briefs by day, and hang out at night with his friend Paul DeAgnes in Atlanta on his big yacht. DeAgnes had a friend in Hilton Head, South Carolina, not far
from Savannah, who was having trouble with his loan. Nye told Paul to send the guy over.

The man visited Nye and brought along a friend, Dan Junk, an expert in electronic legal discovery with a similar mortgage problem. Dan tried to rescind his loan after learning that the originator, American Home Mortgage Servicing, went out of business. Though he followed all specifications for a rescission, the servicer, Citi Mortgage, wouldn't let him out. Nye and Dan struck up a friendship and started collaborating. They would build out the facts of foreclosure cases and work with lawyers to introduce them into courts.

In May 2010 Dan and Nye received an Ice Legal deposition with Beth Cottrell, an operations supervisor at Chase Home Finance. Cottrell's name appeared on a replacement affidavit of amounts due and owing in Lisa's case. The eight-person Chase team in Columbus, Ohio (which included Whitney Cook and Christina Trowbridge, Lisa's robo-signers), signed eighteen thousand documents a month, from assignments to affidavits to allonges. And like every other robo-signer, Cottrell had no knowledge of what she was signing, leaving that to whatever attorney had created the document. “
I have personal knowledge that my staff has personal knowledge,” she said.

In the case in question, there were two “original” notes filed on the same property. “So when you signed the affidavit and said ‘Plaintiff is entitled to enforce the note and mortgage,'” Ice Legal attorney Dustin Zacks asked Cottrell, “you didn't know which of these two notes you were referring to?”

“No,” Cottrell answered.

Of particular interest to Nye and Dan Junk was how the documents would get notarized. Cottrell would sign a stack of documents, put them in a folder, and hand them over to the notaries, who stamped and signed everything later. Nye read over that part and said to Dan, “This is notary fraud in the state of Ohio.” That was important because Dan Junk's sister was Jennifer Brunner, the Ohio secretary of state. And secretaries of state had jurisdiction over notaries.

Brunner served as a common pleas judge in Franklin County, Ohio, for several years, and during the housing bubble she saw plenty of odd foreclosure cases. Either the defendant was never served papers, or the plaintiff
would get suddenly substituted, or the bank claimed they lost the note. Brunner always wondered how a bank could lose a note.
But most homeowners never mounted a defense, so there wasn't much she could do. As secretary of state, Brunner built a reputation for integrity. She entered the Democratic primary for Senate in 2010 but lost in May, making her a lame duck.

After the primary, Dan sent his sister the Beth Cottrell deposition, highlighting the section on notarizations. When she read the deposition, she and her legal staff agreed that Cottrell admitted to notary fraud. But after some research, she learned there weren't many options for secretaries of state to sanction notaries. The best she could do was forward violations to the Justice Department as a criminal referral.

Brunner had been working on a separate matter with Steve Dettelbach, the U.S. attorney from Cleveland. In August, Brunner hand-carried the deposition to Dettelbach with a criminal referral, and awaited a response. Unbeknownst to her, a fellow statewide officer, Ohio attorney general Richard Cordray, was also investigating robo-signing, particularly the Jeffrey Stephan affidavits. Cordray planned to file a lawsuit against GMAC for fraud against Ohio courts.
When Brunner got wind of this, she asked Dettelbach if she could announce her criminal referral in the Chase Home Finance case. Dettelbach said sure.

Two days before Brunner went public, on September 29,
Chase Home Finance announced it would suspend foreclosure operations in all judicial states. It would have been customary for Dettelbach to inform Chase they were being targeted for investigation. It certainly looked like Chase was preempting disclosures about the criminal case.

The Great Foreclosure Machine could maybe explain away one mortgage servicer's corrupt practices. But now a second admitted to the same misconduct. There's an old Monty Python sketch about
the Amazing Mystico, a conjurer who imagined a block of flats with his mind. The tenants had to believe in the building for it to stay upright; if they stopped believing, it would tumble. By September 29, everybody stopped believing in the Great Foreclosure Machine.

Nye chuckled at the timing. In 2000, former SEC chair Arthur Levitt told him about the ten-year lag between the identification of financial fraud
and its exposure. September 29, 2010, was almost exactly ten years from the day Levitt made that comment.

Lisa Epstein and Michael Redman, after toiling in obscurity for a year, were suddenly among a small collection of experts able to talk about this scandal. Journalists they hadn't heard from in years solicited comments or interviews or document requests. CNBC wanted to film Lisa asking questions for a town hall meeting with President Obama. Ariana Cha, a
Washington Post
reporter, asked Michael if there were documents signed by Jeffrey Stephan in non-judicial foreclosure states, where GMAC hadn't yet halted foreclosures.
The next day Cha wrote an article, “Ally's Mortgage Documentation Problems Could Extend Beyond 23 States,” based on Michael's research.
Kim Miller at the
Palm Beach Post
published a tip from Lisa that GMAC withdrew affidavits from another one of their robo-signers, Kristine Wilson. Lisa found other withdrawals, including
documents signed by Linda Green, the infamous DocX robo-signer from Lynn's papers.
Michael Olenick found Beth Cottrell's name attached to dozens of foreclosure cases for banks other than Chase. “
The GMAC announcement was the mushroom cloud,” Matt Weidner soberly told the
New York Times
. “The fallout will burn through the entire mortgage servicing industry.”