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EDITOR’S COMMENT: This is the start of what we have been waiting for. Investors who purchased David Stern’s operation — a foreclosure mill that had been bank-rolled literally by the Banks. They actually have the necessary files, documentation and proof needed because they now own the company and they realize they were induced to buy a “criminal enterprise.”

This is what I have been talking about. Investors of all shapes and sizes are starting to awaken to the fact that the entire foreclosure process has been permeated by false statements as to the amounts due, the identity of the creditor, and the documents that “perfected” the lien, transferred the loan and were the basis for foreclosure. None of the foreclosures are real. That is a grandiose statement, but it will prove to be true.

This news is important not only because it corroborates the defenses of borrowers in tens of thousands of foreclosure cases filed by Stern. It is really important because what will emerge is a fact pattern that shows that ALL of the foreclosure mills were operating in the same way because all of them were essentially renting their law license to the Banks who were covering up the securitization scam, to wit: that the securitization that was documented was never followed, that the money trail does not conform to the documents, and that the liens were never perfected and were therefore not subject to foreclosure because they were unsecured.

By: Cynthia Kouril Wednesday January 4, 2012 7:22 am


In 2010, the Law Offices of David J. Stern spun off the robo signing document mill part of his business into a separate, publicly traded company.

Stern pocketed some $60 million from that deal. The investors got the company and all its documents, internal procedures and everything you would need in order to find out what really happened within the Stern document mill.

A little after 8 AM EST today, a filing went up on the SEC’s Edgar database. It’s a Complaint in lawsuit, dated yesterday.

The lawsuit is by the investors suing Stern for lying to them about the activities of the document mill and misleading them into believing they were buying a legitimate business instead of a criminal enterprise. Unlike a regular plaintiff or an Attorney General who is dependent on obtaining documents and information FROM the target of their ire via discovery of subpoena or search warrant, these plaintiffs apparently have all the info they need already in hand, because they bought the company.

Let me give a quote or two from the Complaint to show what they found in the books and records of the Stern foreclosure mill.

32. The Seller Defendants’ fraudulent and illegal foreclosure practices prior to the Transaction, and the subsequent demise of the Seller Defendants’ law practice, have now been well documented and reported upon in the local and national media.

33. Prior to the Transaction, the Seller Defendants were at all times well aware that DS Law and the Target Business were intentionally perpetuating a fraud on the courts by, inter alia, systematically filing forged documents, forging signatures on such documents, fraudulently backdating documents, improperly notarizing and witnessing documents, fabricating documents, signing affidavits without reviewing or verifying the information contained therein, prosecuting foreclosure cases without obtaining proper service of process, and filing foreclosures with inaccurate and/or incomplete documents.

34. Indeed, the Seller Defendants directed employees of DS Law and the Target Business to purposefully overlook glaring inaccuracies in foreclosure pleadings and to essentially rubber stamp computer generated documents without reviewing or verifying the accuracy of the documents. New attorneys at DS Law were not only encouraged, but were even ordered to sign legal filings and pleadings without reading them. As a result, false and inaccurate documents were routinely executed and filed with the courts in an effort to hasten foreclosure proceedings and illegally obtain final judgments of foreclosure for the Seller Defendants’ clients.

This is an explosive document, because the plaintiffs here are like insider whistleblowers; they know what’s in the files, because they have the files. This is a godsend for homeowners who have been victims of foreclosure fraud.  It should dramatically increase the pressure for criminal prosecution. More to the point, judges with robo signed documents in front of them will be even more concerned about granting foreclosure judgments; at least they will be when the news about this gets widely reported. Huge hat tip to Florida foreclosure defense guru Lynn Szymoniak who emailed me the Edgar link early this morning while the electrons where still warm.

Folks, please tweet, forward, whatever. This is a huge story that deserves to be given major coverage in MSM. Local judges need to be aware that they are being handed forged documents.

Mortgage Meltdown: Elephant in the Living Room

David Leonhardt: Congratulations on your article today in the NY Times. You addressed the elephant in the living room. For about 100 years, the United States has been acting like an embezzling bookkeeper. First “borrow” a little. Then borrow more because of “necessity”, now you are in debt you cannot pay and living better than you ought to, buying things you don’t need. Now you have better standing in the economic community and you can get credit (you have more because you are spending more, even if it is not money you earned and not value you contributed) whereas before you would have been laughed at. Each dollar you get into your hands becomes a down payment on something bigger and better that you can’t afford. 

People you buy from want you to buy more because they are making more money on more sales. Your employer is getting bookkeeping figures from you that show nice profits so he is spending and investing his “money” wisely or unwise; (money that isn’t there because you took it). Your vendors come up with ways to give you more credit, and the banks discover there is money to be made lending you money. Your balance sheet looks better and better as millions more like you are stealing from themselves (their home equity) or stealing from others to make the down payment on purchasing assets that they don’t need and in many cases don’t want shortly after they buy them. Balance sheets are getting better and better. “Income” is rising. All the economic indicators show that the U.S. is a magical powerhouse that for some reason could not be reproduced in other countries far more established than ours.

Eventually the big LIE gets bigger. Even the people who know or suspect, disregard their own judgment because things are going so well. Like Detroit automakers ignoring the threat from foreign car manufacturers and losing jobs, real income, and real wealth in the process. Assets rise higher and higher in price, more “equity” is created. The fact that the price rise is pulled only partly by demand is not analyzed or reported. Prices are going up because money is being created, printed and conceptualized by merchants, financial institutions and non-financial institutions who have figured out ways to get more money into the hands of the American consumer. Prices are going up because money’s value is going down. Eventually the embezzler starts to rationalize that with all his/her assets he could pay it back if called upon to do so, disregarding the fact that the value is dependent upon the greater fool theory — that someone will always come along and pay more for what you have. All the embezzlers hope for a miracle.

Longevity further “legitamizes” the illegal activity, the theft from your employer, the trick played on your creditors, and the willingness of the creditors to create, promote and allow the fraud and theft to continue. The day of reckoning we always know, comes to the embezzler. In individual cases it hurts only a few dozen people. But when 300 million people do it, it affects billions of people. While waiting for the end and denying it will ever happen, the embezzler become enslaved to their jobs and their standard of lving. They can’t go on vacation because a substitute acountant would discover that the figures have been manipulated — like the basket measured by various price indexes is revamped by a government measuring inflation. The government has an incentive to lie about inflation because if they didn’t, all the pensions and social security and other payments would have to be increased by more each year. That would leave less money for war and social programs. But the the loss of value of the dollar is catching up to us in what is developing as massive hyperinflation — due this year.

First the inflation caused by the greater fool theory. Second the fact that the tide is out on the massive shock caused by the mortgage meltdown —- embezzlement gone wild. The LIE gets bigger and bigger as the government and industry try to cover it up. But other countries with other central banks and other financial institutions and other investors have finally gotten the idea that the U.S. dollar’s “hegemony” as you call it is based upon vapor. We can’t predict what specific actions governments, financial institutions and commercial enterprises will take to protect themselves from the suspicous dollar, but we can predict with certainty, they will protect themselves before they protect us. The consequences of these actions, individually and collectively could be extremely serious to our government, states’ rights (witness greenhouse standards imposed by states where the Federal government failed to step up), regional alliances (witness alliances of attorney generals on tobacco suits and suits against lenders and investment bankers for the mortgage meltdown), where money is stored, and how commercial transactions are conducted. It will probably have a decisive effect on de facto national borders (sorry Dobbs — you are right, but the game is probably over).

The fact is that our economy, more than any other by a wide margin is primarily based upon consumer spending. There is nothing wrong with consumer spending and there is nothing wrong with profit or capitalism. The bitter pill that is coming, whether we like it or not, is that the money is running out. Increasing liquidity is a euphemism for printing money. But the Fed has little effect on the larger set of transactions that create money supply that the Fed cannot control — like the sale of CDO’s with triple AAA ratings, insured by respected bond insurers in order to get money into the hands of unsophisticated, uneducated (thanks to ignoring the educational needs of our young) and clueless people who trust that a system as large as our whole monetary system could not be manipulated, that the appraisal of the value of their house, the mortgage they were steered into by a mortgage broker, and the approval by the lender lends credibility to the transaction (just like on the other end the investor relied on on AAA ratings insured).

By moving the risk from the lender the only motivation was to lend more and devise increasingly sophisticated techniques to get people to sign up for houses on monthly payments they could afford, only to discover that they were guaranteed to lose the house later. By offering the investor a “safe” investment, and developing incentives along the way to sell, package and offer higher rates of return, they guaranteed an unlimited supply of money which would (like in the eyes of every Ponzi) last forever, because the values would continue to increase by 50% per year or more thus enabling refinancing, more fees and more interest as borrowers get deeper and deeper into a debt they will never be able to cover like our embezzler who took just a “little” as a “loan” at the start. 

Presidential candidates and candidates for other offices are skirting the issue because they don’t have the time to study it and therefore don’t understand it. Obama gets close by intuition, Clinton knows only the old school of economics and the econometrics that were manipulated to produce policy. Edwards, undertands the effect but the cause. McCain, Huckabee, Romney and the rest are in the same camp as Hillary. They just don’t understand the implications of selling our tolls roads, ports, military technology etc. to potentially enemy combatants.

Here is the truth: An economy based upon getting funny money into the hands of consumers who are too unsophisticated (because of lack of education) to know what to do with it, and under so much pressure to spend it, and under the spell of making every dollar count as a down payment on more debt, is a house of cards. The dollar is plummeting not because we have a temporary economic problem. It is plummeting because the core assumptions of our economic systems are based upon false figures, and mythology. An economy that is based upon consumers going into debt rather than savings is doomed just as the embezzler is doomed. A 60 inch TV screen that is purchased on debt that the borrower can never repay is not a real sale, not a real loan, and produces no real revenue or profits.

Added to that, like the embezzler, we are now viewed as the the nice guy next store that nobody knew was a criminal. The far reaching effects of the current socio-economic prospects both domestically and abroad are only beginning to surface. How well or badly the domestic and international populations take the reduction of essential social services like housing, food, fire, police and healthcare, nobody knows. History doesn’t give much reason for hope. We are probably in for a transition that will be historic in all perspectives.

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