In the heyday of the mortgage refinance market, lenders were closing billions of dollars of loans across the country. Major lenders in far flung places were agreeing to lend hundreds of thousands of dollars against properties based on representations of loan officers, agents, appraisers and sales people that these lenders knew almost nothing about. In the years leading up to the crash a phone call and a few short applications were all that was required for a con artist, criminal or capitalist to become an agent of a lender and then have access to start throwing millions of dollars of that lender’s money around.
THE LOAN APPLICATION PROCESS- THE BEGINNING OF THE LIE
After the lender accepted the lies on the application, appraisals and contracts that their loan officer sent them, the lender emailed a mountain of documents to a title company. Someone (sometimes a criminal, sometimes just an employee who had every incentive in the world to close the loan and no incentive not to close it) would plunk the mountain of papers down before the borrower and get them to sign no matter what it took.
INPUT THE LIE (LOAN) QUICKLY- WE’VE ALREADY SOLD THE LIE TO SOMEONE ELSE!
After those documents were signed, the entire package of original documents were sent back to the lender. When the original documents were received by that lender, data entry clerks inputted basic information such as the borrower’s name, amount of loan, interest rate on loan and property address into a computer system. In some cases some of the documents were scanned in so that they could be accessed later, but from my experience, (based on the fact that I’ve rarely had a lender produce the important documents) I don’t think this was done in most cases. At some point both before the documents were scanned and inputted or after many of these loans were already sold to third parties. The original documents were either shipped off to third parties or in some cases destroyed or lost in the orgy-like rush to close and sell as many loans as possible as quickly as possible.
NO REAL PAPER TRAIL CREATES REAL PROBLEMS
The deal makers, brokers and con artists were more than happy to close loans, package them and sell them time and time again with no concern for the consequences of the failure to confirm the location and existence of the documents because once they sold them, they got their money and the next party was on the hook. The real problem is that many of the documents signed by the borrower are essential and necessary if the Plaintiff wants to foreclose the mortgage. The pages of disclosures and other documents that a borrower signs at closing represent literally hundreds of years of real property law and state and federal protections that were developed to protect both the borrower and the lender.
LENDERS- YOU MADE YOUR LIES, NOW LIE IN IT!
It was reckless and irresponsible for these lenders to ignore the fact that these documents were important and they cannot now claim the documents just don’t matter. Across the country judges are recognizing this fact, but were all struggling to decide just how to deal with the consequences…..stay tuned!
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