Chain of Title (34 page)

Deutsche Bank did refile for foreclosure against Lynn Szymoniak, naming her son Mark Elliot as a co-defendant, though he was still taking poetry classes in New York City and hadn't lived regularly in Palm Beach Gardens for seven years. A lawsuit on his record could hurt his credit and job prospects.
It was a petty tactic to harass the family into silence. The case dragged on, three years after the initial filing.

Lynn knew
60 Minutes
was the last card she could play to force criminal investigations. She could write
Fraud Digest
articles and appear at happy hours until the end of time and wouldn't get the audience she had on CBS. But Jacksonville didn't budge. The U.S. attorney's office in South Carolina gave her conflicting signals. One day they'd say they were definitely filing criminal charges over the assignments. Then they'd say no, suing Chase for violations of the SCRA would play better with a jury. Then they'd change their minds again and focus on the mills. The indecision seemed to be a pretext for never moving forward.

Lynn wondered if
60 Minutes
could kick-start an IRS investigation. If mortgages were never conveyed to the trusts, with nonperforming loans stuck into them after the fact, they violated REMIC tax laws, which should trigger a 100 percent penalty. Reuters actually reported on this a few weeks after Lynn's story aired, with
the IRS acknowledging an “active review” of REMIC practices in mortgage-backed securities. But Lynn heard from
Naked Capitalism
blogger Yves Smith that the fix was in. A senior IRS officer initially seemed interested but then dropped the issue when the White House sent word that they would not use tax laws as a tool of policy.
When Yves broached REMICs at a meeting with top Treasury officials, they quickly changed the subject. The threat of trillions in tax penalties to induce a resolution was off the agenda. Georgetown professor Adam Levitin described failing to prosecute the REMIC issue as a “
backdoor bailout of the financial system.” Lynn decided not to call the IRS.

Instead of issuing press releases announcing indictments, or photos of top executives led away in handcuffs, Jacksonville only asked Lynn for more
documents. Get me two hundred examples of this law firm signing mortgage assignments after they filed their foreclosure case, or thirty Linda Greens in this region of the country. Lynn spent hours on these projects, feeling like she couldn't say no. At one point the assistant U.S. attorney requested a set of files that Lynn knew would take fourteen hours to assemble. She emailed her friend Henry “Tommy” Clark, the old insurance fraud specialist who partnered with the FBI, telling him about it. Tommy called her within a few minutes, and didn't even say hello. “Don't waste your time,” he said. Lynn was stunned.

Tommy was in the same position as she was—an outsider the office would employ for grunt work, like looking through ten thousand emails, searching for a smoking gun. Tommy worked with his Jacksonville friends for a long time, and saw them as honorable people willing to follow the evidence wherever it led. But he also recognized the pressure imposed on that office from above. So when he said, “I'm not working on it anymore, I've got a whole lot of other cases where I can file,” to Lynn that meant everything. A friend was telling a friend to stand down. It was all over.

As the months went on, Lynn got bits and pieces of the story, always in the roundabout manner Tommy or her other friends used when discussing active investigations. The Justice Department stonewalled the case, refusing requests for additional resources and micromanaging the grand jury probe. She heard one emblematic story, where DoJ sent a young lawyer to south Florida to sit in on an FBI deposition with Cheryl Samons, from the now-defunct Stern law firm. The lawyer obstructed the investigation, filling time with dubious, irrelevant questions and stopping the agent from properly deposing the witness.

People threatened to quit, waved critical pieces of evidence in front of their superior's face, thundered that letting this fade would violate the cause of justice. But it didn't matter. Maybe the office would find a patsy, a sacrificial lamb, and plant everything on them. But it wouldn't be anything close to what Lynn expected in those frantic days thirty months earlier when she stayed up for seventy-two hours straight and made all those discoveries. Those documents in her front room now symbolized a pile of disappointments.

20

THE FINAL WHITEWASH

September 17, 2011

The heat finally subsided in south Florida, cooling the Intracoastal's waters and shaking the palm tree fronds as the winds returned. That summer Michael moved into Lynn's downtown condo, from one foreclosure to another. He insisted on paying the homeowner's association fee out of the cash he held back for the mortgage in Port St. Lucie. With the
4closureFraud
sponsorship in limbo, it was practically all Michael had left. During child support hearings with Jennifer, her lawyer alleged that Michael must have hidden assets. After all, he was a celebrity, featured in newspapers and magazines. He even had his own radio show. “We pay $300 a week for that radio show!” Michael shouted at the hearing. The lawyer couldn't understand that; radio stations paid the hosts, not the other way around.

A liberal group in Washington State contacted Lisa about Dixie Mitchell, a seventy-one-year-old cancer survivor facing foreclosure, whose mortgage servicer, Ocwen, perpetually lost her loan modification paperwork. Ocwen's headquarters were near Lisa's co-op, in a West Palm Beach office park. Lisa and Michael printed T-shirts for a fictional company called Bermuda Triangle Recovery Services, specializing in finding missing documents. On a rainy fall day they hand-delivered Dixie's documents to Ocwen, camera crew in tow, along with a petition from 7,400 Washingtonians supporting Dixie. A man in the lobby, who had been waiting all day to see someone about his mortgage, remarked, “
Boy, I wish I could've done that!” After some media attention,
Dixie did get a modification, showing that
servicers could help their customers—at least if they needed to protect their reputations.

Soon the foreclosure fighters had new allies. On September 17, Occupy Wall Street,
born from a suggestion in the Canadian magazine
Adbusters
, set up camp in Zuccotti Park in lower Manhattan. Protesters expressed widespread frustration that the economy served the interests of the wealthiest 1 percent. Everything foreclosure bloggers documented about the bubble and the crash drove the unrest in New York. Eventually some protesters figured that out; in the beginning they searched for answers.

Occupy spread nationwide, including to Palm Beach. A throng gathered at the Bryant Park clamshell and pitched tents. The first general assembly drew four hundred attendees. Lisa went down and saw nothing like the hordes of violent youths the media were hyping. This group was older, people touched by the financial crash's impact who feared for their kids' futures. Lisa thought she could finally match her knowledge of fraud with enough bodies willing to lie in the street and demand action. She took the floor and started by saying, “If your neighbor is in foreclosure and you call them a deadbeat, you're hurting yourself. Let me explain why.” She tied foreclosures to the accumulation of mortgage-backed securities in public pension funds. Mass foreclosures hurt investors, who would make more money keeping people in their homes at a reduced payment. In fact, preventing foreclosures was preferable for just about everyone. But instead investors paid for delays, fraudulent document production, and legal work, exacerbating losses. The public pension crisis had an antecedent in the foreclosure crisis; people hadn't put that together.

Over time, the Occupy Palm Beach crowds thinned out. But Lisa spent a lot of time at the encampment, bringing Lynn over to run teach-ins on fraudulent documents and vacant properties. The core Occupiers reacted strongly to the message. It gave them an explanation for the rigged system they were condemning.

Occupy's founding coincided with another potential bailout; the fifty-state settlement had been described as “imminent” for at least six months. That summer New York attorney general Eric Schneiderman told a local paper he was “stunned” by the lack of investigative work from the executive committee, declaring, “
We have no leverage.” He announced he would not
sign any settlement if it immunized banks for violating New York law. Instead, he opened a new investigation into the validity of mortgage-backed securities transfers involving Bank of America, as well as leading trustees Deutsche Bank and Bank of New York Mellon. Delaware attorney general Beau Biden, the vice president's son, joined Schneiderman on the probe; between them, they represented states where all mortgage-backed trusts incorporated themselves,
the beating heart of securitization FAIL. At
4closureFraud
, Michael posted graphics portraying Schneiderman in a white hat, like the lawman coming to clean up the town. “
Please everyone, we must support this man,” Michael wrote. “He is our last hope on a national level.”

In response, Tom Miller booted Schneiderman off the fifty-state executive committee, saying he “
actively worked to undermine” settlement efforts. The White House pressured him to support the deal he was just barred from negotiating. Kathryn Wylde, chief executive for the business-friendly Partnership for New York City, even accosted Schneiderman at the funeral for former New York governor Hugh Carey, urging him to back off the banks because “
Wall Street is our Main Street.” Housing and Urban Development secretary Shaun Donovan, who spent months
hosting tea-and-cookies settlement talks with banks in his conference room, didn't deny the effort to rein in Schneiderman, telling the
New York Times
that
everyone would benefit from a speedy resolution. But the fifty-state probe had launched a year earlier; all this time spent crafting deals could instead have been spent on investigating.

As chants of “We are the 99 percent” reverberated, attorneys general chose sides. Delaware's Beau Biden, Massachusetts's Martha Coakley, and Nevada's Catherine Cortez Masto stood with Schneiderman;
all had active foreclosure investigations in their states. On September 13, Lori Swanson of Minnesota released a letter rejecting a settlement over conduct “
that has not been investigated.” Kentucky's Jack Conway announced on September 22 that he opposed “
immunity against the banks.” The big holdout was California's Kamala Harris. Her brother-in-law Tony West, a top Justice Department official, was helping negotiate the settlement, and she served as a key surrogate in Barack Obama's 2008 election. Like almost all attorneys general, she viewed the office as a stepping-stone. But she represented the nation's biggest state, one of the hardest hit by the foreclosure crisis. Without her participation, the settlement would be incomplete.

Practically everyone who helped get Harris elected, from community and labor groups to the half-million-strong California Courage Campaign, started encouraging her to abandon the talks. Phone lines at the attorney general's offices, unused to constituent calls, jammed several times. Gavin Newsom, lieutenant governor and Harris's biggest potential rival in California politics, joined a coalition opposing the emerging deal called
Californians for a Fair Settlement. This presupposed a settlement at some point, instead of civil lawsuits or criminal prosecutions. But it got Harris to abandon Tom Miller. After spending a full day with bank executives trying to hammer out a deal, Harris announced on September 30 that the proposal was “
inadequate for California homeowners” and that she would forge “an independent path forward to resolution.”

A lack of accountability characterized the first decade of the new millennium, from the 2000 election onward. Torturers and warrantless wiretappers and commanders in chief lying America into war received free passes for their crimes with such regularity that upholding the rule of law felt like an anomaly. Banks already got away with breaking the U.S. economy, and for a time it looked like they would obtain the same privilege for the biggest consumer fraud in history, in exchange for a meaningless dollar amount plucked out of thin air. Grassroots activists, joined by scattered leaders disinclined to facilitate a crime spree, put a pause to it. But it was only a pause.

In the foreclosure devastation, community organizers saw kindling for a mass movement wildfire. For years national groups held public protests, like when activists in Robin Hood outfits crossed a moat and stormed JPMorgan Chase's headquarters in Columbus, Ohio (in true medieval fashion,
JPMorgan Chase's headquarters has a moat). But smaller organizations like No One Leaves in Springfield, Massachusetts, specialized in post-foreclosure eviction defense. They combined legal resources for homeowners and mass resistance to
make it painful for banks to toss people into the street. More radical groups like Take Back the Land broke evicted residents back into their vacant homes,
a tactic they called a “live-in.” It was a throwback to farm communities banding together in the Depression to prevent foreclosures and stabilize neighborhoods.

Foreclosed properties stolen by banks with false documents were contested spaces, like the city parks and sidewalks Occupy commandeered.
Matt Browner-Hamlin, who organized the Where Is the Note? campaign for the Service Employees International Union, thought he could convert disorganized Occupy protests into meaningful action. To his surprise, he found it happening organically. In Atlanta, Minneapolis, Cleveland, and Los Angeles, foreclosure victims asked for help at Occupy general assemblies, and
Occupiers mobilized to defend those homes. Browner-Hamlin supported this with a toolkit of resources and links to larger community groups. Occupy Wall Street activists got involved, and soon they announced Occupy Our Homes, a national day of action on December 6, 2011. Organizer Max Berger enthused, “
This is a shift from protesting Wall Street fraud to taking action on behalf of people who were harmed by it.”

With her new friends at Occupy Palm Beach,
Lisa organized two events. One was a program called Foreclosure Watch, based on the efforts of Mothers Against Drunk Driving in the 1980s. In the morning, activists in Foreclosure Watch T-shirts sat in the courtroom and bore witness to hearings, their presence a signal that rulings affecting homeowners would be monitored and remembered. Judges seemed to take more care when Foreclosure Watch arrived.

In the evening, protesters lit candles at a Deutsche Bank–owned foreclosed property on North B Street in Lake Worth, to “mourn” lack of prosecutions of bank executives. Lisa previously participated in two previous vigils at this same white-and-yellow house, which had been boarded up for years without Deutsche Bank spending a dime to maintain it. Lynn and Michael and Jenna were there, too, along with dozens of others.

Other Occupy Our Homes groups were more aggressive. Protesters formed a human chain around foreclosed homes, keeping residents safe inside. Activists in Atlanta camped in the front yard of a police officer facing eviction. Families reclaimed vacant homes. In Brooklyn, Occupiers disrupted a foreclosure court by loudly singing; other demonstrators “micchecked” foreclosure auctions.

These tactics worked. Los Angeles homeowner
Rose Gudiel, who occupied her foreclosed home, got a loan modification offer from Fannie Mae.
Beth Sommerer of Cleveland won a thirty-day stay of eviction. One-hundred-three-year-old
Vita Lee of Atlanta got a reprieve from JPMorgan Chase. In Minneapolis, an ex-Marine named
Bobby Hull had 150 people
rally on his front lawn in front of television cameras, refusing to leave. Bank of America made him a deal.

Even after local police dismantled Occupy encampments, evicting protesters the way they evicted homeowners, Occupy Our Homes lived on. Homes became community hubs, with round-the-clock patrols so that homeowners could leave for work without threat of repossession. Occupy Homes Minneapolis placed heavy concrete barrels on front porches and chained themselves to them, making it difficult for law enforcement to remove them. They created an emergency text blast system that could bring a hundred activists to homes within thirty minutes. Occupy Fights Foreclosures in Los Angeles descended on foreclosure auctions, warning that banks had no proof of ownership in the homes they were selling. One thousand Los Angeles protesters prepared a
Rose Parade float, a seventy-foot octopus made from plastic bags, symbolizing the financial industry.

Behind the resistance, Occupy Our Homes facilitated negotiations with mortgage servicers, with the protests creating leverage. Organizers recognized the value in creating a cost for evictions, throwing sand in the gears of the Great Foreclosure Machine. Victims telling their stories humanized the crisis and brought media attention that no bank wanted. Occupy Our Homes neutralized the greatest weapon the financial industry employed: shame. If you could convince homeowners that they did nothing wrong, you could get them to defy an unjust process, and build political power.

Evidence of false documents underpinned the movement and tore the veneer off the industry's schemes. Occupy Our Homes members knew about Linda Green. They understood securitization FAIL. If law enforcement would not arrest the perpetrators of an industry-wide crime spree, protesters would enforce the law through confrontation.

As protesters took action, Lynn found another inside game in
Nevada, where three out of every five homeowners were underwater. Before their firing, June and Theresa worked with Nevada investigators on LPS. So Lynn sent files over and connected with Helene Lester, an assistant to John Kelleher, chief deputy of the Criminal Fraud Unit. When Kelleher was chosen to lead Nevada's Mortgage Fraud Strike Force in 2007, there wasn't even a crime called “mortgage fraud” in the state code. But after educating
himself and hearing thousands of consumer complaints,
he recognized the depth of the problem. With assistance from Lisa, Lynn passed along numerous documents to the strike force that summer, explaining to Lester in strategy sessions how they could locate fraud in county records. Lynn became their go-to consultant.

Catherine Cortez Masto, Nevada's attorney general, told Kelleher to follow the evidence wherever it led, and prosecute whomever was responsible. In August 2011, Masto sued Bank of America for promising to modify mortgages in a prior settlement but deceiving homeowners instead. In an amended complaint, Masto pulled out a bazooka: