U.S. Trustee Alleges Systematic Fraud in Bankruptcy Courts

U.S. Trustee To Federal Judge: “Fidelity Operated An

Affidavit-Execution Process

That Systematically Caused The Execution Of False Affidavits!”


The U.S. Trustee’s Office has recently filed a Post-Trial Brief in ongoing bankruptcy litigation in a U.S. Bankruptcy Court in New Orleans, Louisiana in which it asks Judge Elizabeth W. Magner to hammer the alleged foreclosure document manufacturing racket management firm Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. (“Fidelity”) with sanctions for allegedly: 

  • [p]ermitt[ing] its officer, Dory Goebel, to give materially misleading testimony to the Court on August 21, 2008, and should be sanctioned. It is undisputed that important parts of Goebel’s testimony were untrue; the crux of the matter now is determining Fidelity’s level of culpability. The evidence proves that, at a minimum, Fidelity acted with indifference to the truth in permitting Goebel to give the misleading testimony. (See U.S. Trustee’s Post-Trial Brief In Lieu Of Closing Argument, at page 1.)

In the following excerpt, U.S. Trustee describes to Judge Magner what it thinks of Fidelity (bold text is my emphasis) (Post-trial brief, at p. 21-22):

  • Fidelity operated an affidavit-execution process that systematically caused the execution of false affidavits. That Fidelity considered this a valuable service to its clients is made manifest in an article co-authored by Ms. Goebel appearing in Fidelity’s corporate newsletter The Summit. In the article, published in September, 2006, Fidelity trumpeted the efficiency and benefits that its “document execution” process offered to servicer clients. Trial Ex. 17.The Fidelity affidavits were false because, per Fidelity’s procedures, its affiant-employees: 1) did not sign in the presence of notaries; 2) did not take any steps to obtain personal knowledge of the averments contained in the affidavits; and 3) falsely represented the contrary, within the affidavits themselves, as to possession of requisite personal knowledge. Fidelity officers Scott Walter and Ms. Goebel testified in complete agreement that Ms. Goebel would not have executed her affidavit in the presence of a notary, and that Ms. Goebel would have obeyed Fidelity’s procedures in that respect. December 1 Tr. 246:6-12, 337:5-22, 332:3-4.Mr. Walter and Ms. Goebel also testified in complete agreement that Goebel would not have gained personal knowledge about the averments in her affidavit and, again, that Goebel’s execution of the affidavit without gaining personal knowledge would have been in compliance with Fidelity’s procedures in that respect. December 1 Tr. 248:1-8, 342:21-343:3. Logically, thus, Fidelity expected its affiants to swear, falsely, that they had gained that personal knowledge.

The U.S. Trustee’s brief then goes on to give a damning example of this alleged misconduct.(1)

For more, see In re Wilson – U.S. Trustee’s Post-Trial Brief (filed February 1, 2011).

(1) In bankruptcy litigation unconnected to this case, the following excerpt from a December, 2010 Reuters story (see Special report: Legal woes mount for a foreclosure kingpin) reports on Lender Processing Services (f/k/a Fidelity National Information Services) getting into a Pennsylvania bankruptcy judge’s cross-hairs because of its business practices in connection with foreclosure actions:

  • In an April 2009 court decision, Diane Weiss Sigmund, a federal bankruptcy judge in Philadelphia, specifically faulted lawyers whose firm filed LPS-transmitted documents in court using clerical workers to sign the name of a lawyer who hadn’t looked at them. In that case, it turned out that, contrary to the documents supplied via the LPS system, the homeowners weren’t in default on their mortgage.Referring to the LPS computer system, the judge stated, “the flaws in this automated process become apparent.” She added: “An attorney must cease processing files and act like a lawyer.”

Judge Sigmund, in In re Taylor, Case No. 07-15385-DWS (Bankr. E.D. Pa., April 15, 2009), had to deal with numerous document and communications screwups because of the business model used by LPS, and which led her to make the observation that the case before her was “a textbook example of why the [LPS] procedures used by HSBC and its counsel in the name of minimizing collection costs is so problematic.”

Judge Sigmund concluded her 58-page opinion in her 2009 ruling with this parting shot at Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc. and the foreclosure mill law firms they hop into bed with:

  • At issue in these cases are the homes of poor and unfortunate debtors, more and more of whom are threatened with foreclosure due to the historic job loss and housing crisis in this country. Congress, in its wisdom, has fashioned a bankruptcy law which balances the rights and duties of debtors and creditors. Chapter 13 is a rehabilitative process with a goal of saving the family home. The thoughtless mechanical employment of computer·driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system. It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology. Nothing less should be tolerated.

posted by Home Equity Theft Reporter

12 Responses

  1. LSI Title f/k/a LPS f/k/a Fidelity shows on my NOD and then is covered with official records stamp filed at court house. This was filed by Default Resolution Network f/k/a Fidelity National Title Company.

    Cindi Ellis f/k/a employee for American Home Mortgage Servicing signs as Assistant Vice President for MERS on Notice of Trustee’s Sale but does not sign for Substitution of Trustee.

    Under Substitution of Trustee it states….

    WHEREAS, the UNDERSIGNED, the current beneficiary, desires to substitute a new Trustee etc..

    Now, THEREFORE, the UNDERSIGNED hereby substitutes Power of Default Services, Inc whose address is Fidelity National Title Company.

    This is signed only by Lorena Enriquez who is notary for Fidelity National Title Company. So whether MERS desires to substitute a new trustee, where is the signature from Cindi-MERS authorizing this. Looks like Fidelity granted itself as beneficiary. Not MERS.

  2. Regulators to Hit Largest Mortgage Servicers with Enforcement Orders; Fines Likely
    American Banker | Thursday, February 17, 2011

    By Cheyenne Hopkins

    Capital Concerns Drive Enforcement Actions Against Banks to New High – February 11, 2011
    WASHINGTON — Alarmed by significant deficiencies uncovered as part of a regulatory review of mortgage servicer practices, the federal banking agencies are preparing formal enforcement actions against the largest servicing firms, hoping the actions will set de facto standards across the industry, according to sources familiar with the situation.

    The enforcement orders are expected to hit most, and possibly all, of the 14 mortgage servicers reviewed by regulators after foreclosure problems surfaced in the press last year, but the largest firms — including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and Ally Financial Inc. — are likely to face the toughest requirements, due to the sheer number of issues that must be addressed, sources said.

    The orders are expected to be coupled with a global settlement with other government entities investigating the servicing industry, which is almost certain to include civil money penalties. Regulators are still discussing the terms with state attorneys general, the Justice Department, the Department of Housing and Urban Development, the Treasury Department and the Consumer Financial Protection Bureau.

    “The OCC and the other federal banking agencies with relevant jurisdiction are in the process of finalizing actions that will incorporate appropriate remedial requirements and sanctions with respect to the servicers within their respective jurisdictions,” said Acting Comptroller of the Currency John Walsh, according to prepared testimony obtained by American Banker and due to be delivered Thursday to the Senate Banking Committee.

    “We expect that our actions will comprehensively address servicers’ identified deficiencies and will hold servicers to standards that require effective and proactive risk management of servicing operations, and appropriate remediation for customers who have been financially harmed by defects in servicers’ standards and procedures. We also intend to leverage our findings and lessons learned in this examination of enforcement process to contribute to the development of national servicing standards.”

    Regulators are hoping the enforcement orders will send a message to the rest of the servicing industry. Although the exact details of the orders are still under discussion, sources said they are likely to include requirements that servicers beef up staffing, establish a single point of contact for borrowers, and conduct a comprehensive look back at their servicing portfolio to detect and correct problems.

    The Federal Deposit Insurance Corp. and other government officials are also pushing to include an agreement to offer enhanced, streamlined modifications to troubled borrowers in exchange for a clearer path to foreclosure if re-default occurs after the workout. It remains unclear, however, if regulators will take such a step.

    Several banks had initially expected the enforcement orders to come as early as this week, but that timeline appears to be slipping. Sources indicated regulators are shooting to issue the orders, along with the global settlement, sometime in March. After the orders are released, regulators will follow up with a report on the findings of their review and further recommendations.

    There also appear to be differences among the agencies in how tough to make the enforcement orders and how high the monetary penalty should be. The CFPB, among others, has been pushing for steep fines to be assessed on servicers, coupled with stringent remedial actions. The FDIC is also said to be pushing for tougher enforcement measures, while the Office of the Comptroller of the Currency is concerned about taking overly harsh actions. Regulators met Monday with Treasury Secretary Tim Geithner and representatives from the Federal Housing Finance Agency, HUD and CFPB to discuss the pending actions.

    Although the orders will effectively establish standards for the largest servicers, they are not expected to supplant efforts already underway for regulators to issue their own formal set of rules. Regulators are still divided on where and how to set such standards, with the FDIC pushing to include them as part of a risk-retention rule while the OCC wants to craft a stand-alone measure.

    Regulators have been hinting for weeks that they may take enforcement actions against servicers, as they sought to reassure Congress they are on top of the issue. “We are directing banks to take corrective action where we find errors or deficiencies, and we have an array of informal and formal enforcement actions and penalties that we will impose if warranted,” Walsh said in testimony on Dec. 1. “These range from informal memoranda of understanding to civil money penalties, removals from banking, and criminal referrals.”

    FDIC Chairman Sheila Bair has been vocal that any solution must result in industrywide standards.

    “In order to remedy failures endemic to the largest mortgage servicers, I hope to see enforceable requirements that will significantly improve opportunities for homeowners to avoid foreclosure,” Bair said in a January 19 speech to the Mortgage Bankers Association.

    Some observers said it’s apparent the servicers should have taken remedial steps on their own before regulators stepped in.

    “It’s unfortunate it had to get this point,” said William Longbrake, an executive-in-residence at the University of Maryland. “It would have been better if the industry had done these things without the federal government.”

    While the settlement is likely to be bad public relations for the servicers involved, Jaret Seiberg, a policy analyst at MF Global Inc.’s Washington Research Group, said a global settlement may still be positive news for the industry.

    “A global settlement should be extremely positive for banks by putting this issue to rest and letting the industry move past the paperwork snafus,” Seiberg said.

    He was most intrigued by the potential for streamlined modifications, saying such a requirement could have an impact.

    “The easier you make the modification the more likely you are to get a modification, so the concept makes a lot of sense,” Seiberg said. “For the industry, where there is an automatic modification and then foreclosure if the borrower goes delinquent a second time, you could end up benefiting the banks because it’s going to eliminate a lot of uncertainty now about the ability of financial firms to foreclose on borrowers behind on payments. Right now there are so many programs out there, it difficult to know when banks can foreclose. This would set up a streamlined model.”

    The bank regulators began an interagency review team of the 14 largest servicers in September following reports of robo-signing and foreclosure problems at BofA, Ally, and JPMorgan. According to the OCC, the eight largest national bank mortgage servicers account for approximately 63% of all mortgages outstanding in the United States and nearly 33.3 million loans totaling almost $5.8 trillion in principal balances as of June 30, 2010.

  3. Robo signers issue is after the fact that if mers is involved then they cannot assign nor transfer what THEY DONT have NOR HOLD and have NO interest in the security instrument and never did. Bare legal title only, that was done by the origionating lender who was a broker! A negative cannot be prooved because the record is hijacked by mers

  4. Concerned: Good to know. I’m in an AP and my originator was ABC (lucky me!) Just like yours there were no subsequent recordings/assignments. However, they never filed a POC – it was a 7, but if the amount is listed as disputed or unknown, they are supposed to file a POC. I also have MERS and FNMA. Definitely securitized.

  5. finally.

    Most of these companies and the new ones being formed and proposed by the banksters, simple enable the fraud.

    Even the promissory notes are supect. We should be more demanding of our US Trustees, in some states the BK trustee is a private law firm under contract with the US Trustee office. THEY USUALLY ARE 10000% pro lenders, and treat most BK filers as crimminals.

    the level of abuse, collussion, and frarnization in the BK courts amounts to almost being corrupt and criminal.

    before any one is discharged or for that matter lift of stays granted the alleged creditors should be forced to prove up their claims under oath. otherwise the legal travesty will continue.

    I applaud those judges that have taken a stand for the truth. I rip my coat’s lapel in dismay, horror, disappointment and frustration at those judges that continue to allow criminal mafia enterprises to run their courthouses.

  6. Mike, I had LSI/LPS too. I deposed the signer on the NOD who works for LSI, and they sent me the entire foreclosure file and she signed an affidavit for me. They are the fall guys. They know nothing and they do whatever the servicer tells them to do. The court doesn’t care. They only care if you made the payments or not.

  7. Mike,

    On my own NOD, the company shown is ‘LSI Title’ but people need to go and ‘google’ the company name they find on the NOD/NOS.

    It turns out that ‘LSI Title’ is an “LPS company”.

  8. Disregard my question. They were noticed on the NOD and NOS. I guess in Cali they use LPS-ASAP

  9. How can you find out if LPS was used in your foreclosure?

  10. You would think that ONE assignment of the mortgage occurring LONG after the start of foreclosure would be enough. Well, not in my own case.

    I have TWO separate transfers (assignments) that not only occurred AFTER the foreclosure was started, but are also DURING the bankruptcy stay.

    The first one was filed after the Proof of Claim was filed. Almost a month after the POC filing, the assignment that attempted to match up with the creditor shown on the POC was filed. Then, more than 6 months later, a new assignment has occurred that no longer matches with the creditor on their POC.

    The adversary filing was already in the works. The fraudsters just keep adding content for it.

    The first assignment was never reported per TILA, nor was it reported to the BK court. Nothing was submitted that shows any ‘chain of title’ because it did and does not exist. The so-called ‘single-step’ assignments that are being executed after the fact, transferring mortgages to REMICs do not work. {Those transfers show as assignments to ‘ABC’ as Trustee for ‘REMIC-name’ year-sub certificate-holders.)

    Beware, they are now trying to ‘paper over’ the problems with a transfer to just the entity ‘ABC’ that was the supposed Trustee for the particular REMIC.

    If you do not as-yet have the assignment to the REMIC, they may try to fool you about whether your mortgage involved any securitization via this filing of an assignment in favor of ‘ABC’.

  11. The illegal document-creating companies are a big part of the fraud in the courts. Check out WellsofJustice.com. The website contains lots of important information about bankruptcy courts and how they function or do not function as the case may be. Burmese8@yahoo.com

Contribute to the discussion!

%d bloggers like this: