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The Destruction of a Foreclosure Lawyer’s Faith in the Justice System

Thursday, 12/8/2011 – 11:26 am by Thomas A. Cox

home-foreclosure-documentIf the courts can’t address clear instances of fraud and injustice, how can they protect our citizens?

It has been exactly 18 months since I deposed GMAC Mortgage’s prolific document signer, Jeffrey Stephan, in a case where I was defending a Maine homeowner in foreclosure. Stephan admitted to signing 8,000 to 10,000 foreclosure documents a month (that is about one a minute, if you do the arithmetic), including summary judgment affidavits used by courts as the basis for entering forclosure judgments. Stephan’s affidavits were sent by GMAC to courts all over the country. Obviously, and as Stephan admitted, he did not bother to read those affidavits. He also admitted that he had no idea as to whether the foreclosure affidavits that he signed were true. He didn’t even trouble himself to appear before a notary to be sworn, even though his affidavits said that he had done so. While Stephan admitted that he understood that judges were relying upon his affidavits to take away the homes of homeowners all over the country, he seemed serene and untroubled by his dishonesty in signing these false affidavits. (Conduct like this has since been awarded the slang term “robo-signing,” but I never use it because it fails to adequately describe the dishonesty and deception involved.)

Subsequently, we developed the proof that GMAC Mortgage had been sanctioned in Florida for exactly this same kind of dishonesty four years earlier, in 2006, for an affidavit similarly signed in 2004. This was three years before the foreclosure crisis bloomed in 2007, so it was clear that GMAC’s dishonest conduct was not some sort of harried response to the burgeoning workload of the foreclosure crisis. Rather, it was corporate policy crafted in normal times, and apparently borne of its intention to conduct foreclosures swiftly and on the cheap, without regard to standards of honesty and justice.

GMAC’s unwillingness to change this fraudulent corporate policy after it was exposed in 2006 was evidenced by the fact that its employee, whose conduct caused GMAC to be sanctioned in Florida, was apparently not herself reprimanded or sanctioned by GMAC. To the contrary, and astonishingly, she was promoted, appointed to head GMAC’s mortgage foreclosure department. She became Stephan’s boss as he continued from 2008 well into 2010 exactly the same dishonest and fraudulent conduct that she had pioneered back in 2004.

Coincidentally, it was on December 6, 2011, only one day short of the 18-month anniversary of Stephan’s June 7, 2010 deposition in a foreclosure case brought by GMAC Mortgage on behalf of Fannie Mae in the State of Maine, that the Maine Supreme Court ruled on an appeal in that case. See FNMA v. Bradbury, 2011 ME 120, __A.3d __. This is how the Justices of the Maine Supreme Court described the conduct of GMAC Mortgage, LLC:

The affidavit in this case is a disturbing example of a reprehensible practice. That such fraudulent evidentiary filings are being submitted to courts is both violative of the rules of court and ethically indefensible. The conduct through which this affidavit was created and submitted displays a serious and alarming lack of respect for the nation’s judiciaries.

So, what did the Maine Supreme Court do about this outrageous assault on the justice system? Nothing.

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Before we took the appeal to the Maine Supreme Court, the trial court had already ordered GMAC to pay my counsel fees incurred in taking Stephan’s deposition and in bringing the motion that exposed the fraudulent conduct GMAC and Stephan to the court. But that trial court refused our request to use the power, expressly granted to it by Maine’s rules of court, to hold GMAC in contempt and to impose penalties proportionate to its multiyear and multistate rampage of ethically indefensible misconduct. As the dissenting judge in the Maine Supreme Court decision stated:

Because Stephan admitted that he signed thousands of such affidavits and related documents each month and GMAC was previously sanctioned for similar conduct, there was good cause to believe that such misconduct was not limited to this case and that the management of GMAC and Fannie Mae, and their attorneys, knew or should have known of the wrongful manner in which the affidavit presented in this case was produced.

A Maine Supreme Court justice found that GMAC management knew of the fraud. Yet, because this expressly granted contempt power had never been used before, the Maine Supreme Court refused to order its application in this case.

The Justices of the Maine Supreme Court cited this lack of legal precedent as a basis for refusing to take decisive action against the misconduct of GMAC Mortgage. They refused to acknowledge the fact that no court had ever before been presented with such an extreme, outrageous, and widespread pattern of “reprehensible practice” and “ethically indefensible” conduct that evidenced such an unprecedented “serious and alarming lack of respect for the nation’s judiciaries.” The outrageous facts of this case cried out for a precedent setting ruling that such conduct must expose the perpetrator to serious and heavy contempt of court sanctions. A ruling fining GMAC Mortgage an amount of money proportionate to the hundreds of thousands of dollars it had saved by cutting corners in its affidavit signing practices was called for. The Maine Supreme Court didn’t see it that way, and missed an exceptional opportunity to send a message to the mortgage servicing industry that its fraudulent and unethical conduct will not be tolerated.

This case was a perfect opportunity to have the Maine justice system speak out loudly and clearly in favor of the rule of law, to demonstrate its willingness and ability to protect the little guy against corporate bullies, and to take decisive action to protect the integrity of our judicial system. Such a decision could have been a beacon of justice to homeowners everywhere and a precedent to be relied upon by courts all over the country in sanctioning the similar conduct that has been perpetrated in their courts. Yet our effort to achieve this has failed and my devotion to exposing this injustice has for the most part been for naught.

My faith in our courts’ willingness to protect individuals against what the Maine Supreme Court itself called the “fraudulent” and “unethical” conduct of the nation’s fifth largest mortgage loan servicer (which is also largely owned by the American people — Ally Financial, the parent of GMAC Mortgage, is 76 percent owned by taxpayers) is broken. Two days after this unfortunate decision, and exactly one and a half years after exposing this fraudulent and unethical conduct, I, as a lawyer who spent his entire career believing in our justice system, am left with a deep sense of despair and a lot of questions. If we could not succeed in obtaining justice in this case, what more can we possibly do? What will it take to cause courts to stand up to and halt this “serious and alarming lack of respect for the nation’s judiciaries” by America’s largest financial institutions?  Is my continuing effort to try to help homeowners in foreclosure really worthwhile? How can I possibly tell clients to believe that our justice system will protect them against the depredations of America’s financial industry? Why should I continue my volunteer efforts to expose injustice when the courts will not take decisive measures to sanction it and bring it to a halt when we provide such clear and convincing proof of such fraudulent conduct?

I have devoted my career to the legal system and to seeking justice for my clients. I believed in the integrity of the judicial system and its capacity to prevent fraud and injustice. It is sad to be nearing the end my career with that belief so deeply shaken.

Thomas Cox is a retired bank lawyer in Portland, Maine who serves as the Volunteer Program Coordinator for the Maine Attorney’s Saving Homes (MASH) program. He represents homeowners in foreclosure, and assists and consults with other volunteer lawyers in providing pro bono legal services to these Maine homeowners.


7 Responses

  1. It might be kept in mind that the Maine Supreme Court actually does have “precedent” for taking action against GMAC for its fraud upon the courts of the State of Maine. Remember that all foreclosure cases are inherently cases of equity, and equitable principles apply. The US Supreme Court recognized this in the case “Keystone Driller Co. v; General Excavator Co,” cited as 290 U.S. 240, wherein the Court ruled that when a plaintiff first comes before the Court with unclean hands, that where the actor has not been “fair and frank with the Court,” then the penalty in equity is that “his cause shall not be heard, and the court house doors shall be barred against him in limine.”

    In Keystone, the offender attempted to influence the judicial determination of the dispute by going sneakily to a witness and bribing him to perjure himself – which he did. The plot was revealed, and so the Court tossed out the Complaint and ruled that the plaintiff could never again bring his case (the “barring of the court house doors”).

    Take this to the GMAC platform, and – building on Keystone – the Maine Supreme Court would have been entirely justified to declare the individual mortgage in controversy Void, and have the Pledge stricken from the land records, and declared the Note void. More interestingly, the Court could also have said: “OK, that’s it, fellas, you are barred from our Courts forever for these sins, so go away, do not darken our doors again,” and thereby declared all Notes and Mortgages held by GMAC to be voided. In the vernacular, GMAC gets kicked out of Court.

    And the Court, sua sponte, could have referred the foreclosure attorneys to the Statewide Bar Disciplinary Committee for inquiry as to whether or not the attorneys should be barred from the State.

    I suspect the Court did not do either of these things simply because (1) they had never heard of Keystone, and (2) it did not occur to them. Sometimes, you just have to go prod these guys.

  2. Sad! The court will not concur with the man (lawyer) in the field.
    The following link only goes along with the disgruntled attorney, it is titled, “Behind the financial crisis: A fraud investigator talks”.

  3. wish we had an organization like that in CA. Ruling by USED magistarate 2:11-cv-02370-lkk-dad dismissed for lack of jurisdiction since i sighted mostly state case law. I need to find fed law in fraud documents to cite to the District Judge on reply.

  4. Great interview, E. Tolle. Thanks for sharing!

  5. The Supreme Court of Maine, except for one, has chosen to grant huge financial benefit to an entity they agreed had committed felony crimes in their own state. Get out the old law books and determine if it was an act of sedition and/or treason for aiding and abetting the continuation of crimes against the citizens of their state and deriving financial gain from your harm.
    What are you going to do?

  6. UMKC Professor Michael Hudson has fix for all that ails us folks, and you know what? We can do it. We, the 99%, can see that whatever it is that we want done – gets done, whether they, the 1%, like it or not. We can do this through civil means, or not, it depends upon how stiff their grasp on the make believe reigns of power that they believe they hold so tight. In the end it matters not to me, whether they resist and we have to get nasty….we as people have had to do that dance since the beginning of oligarchies….why should this time be any different?

    This radio interview is well worth the listen, and in all my time spent with the OWS movement, I personally haven’t heard any one person articulate where we are and where we need to go as well as professor Hudson. Just imagine for a moment what it would be like to have people like him, Randy Wray, and Bill Black in positions of power in D.C., working FOR the people, not AGAINST us all, as is the situation we find ourselves in. It can happen. It has to.

    He’s one of the few that understand that the system is so totally screwed that there are few parts that are salvageable.

    It’s way passed time for change. Here’s what Hudson says about our courts, and this relates to the post above by Neil:

    As president, you invite the Supreme Court members into your office and you say, “Please don’t take this personally, but because of the lifetime membership, I have to take you into the next room and shoot you….unless of course you simply want to resign.” So, you get their resignations, you give them an offer they can’t refuse. And then you appoint people that are not radicals and that will reverse the Citizens United ruling, the ruling that says that corporations can give out the same as people and in fact gives them even more rights than people….you essentially clean up the corruption of the legal system that has led to the crooks not being led to jail and essentially decriminalized financial fraud.

    You then setup a banking system, and there are a number of proposals for this, you setup a public option for banking so that instead of being reliant on Bank of America or Citibank for credit cards, the government is going to run a bank and a credit card at cost, and the idea….all throughout the 19th century the idea was that a public option, and at that time it was a post office bank, would provide banking at cost or a subsidized price just for the reason that a government would supply free roads….you want to lower the cost of doing business.

    So, by providing a public option you would essentially push the existing banks out of business unless they acted like the old savings banks and S&Ls did….in fact, at the most radical, what I would want to do is the Chicago plan, which was promoted in the 1930’s….essentially you take away the banks right to create credit and you make them do what the textbook says banks are supposed to do….they take deposits and they lend them out, and because there are not enough deposits in the economy, the government would create money….the Treasury would create the money and supply it to the banks to lend out….but….you’d rewrite the banking laws so that they’re not able to gamble. You reinstate the Glass-Steagall Act so that they can’t gamble….you re-establish productive lending so that the banks will lend for actual capital formation, not simply bid up the price of assets and real estate and stocks and bonds.

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