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The Bankers' Subversion of the Rule of Law, Notary and Land Records edition

firedoglake.comApr 23, 2012

By Abigail Caplovitz Field

One way to see the double standard at the heart of the foreclosure fraud—one set of laws for the bailed out banks, one for the rest of us—is to focus on the role of notaries public, and then consider that role in light of what our Supreme Court said about notaries in 1984, in a case called Bernal v. Fainter, Secretary of State of Texas.

First, let’s recap the role of notaries in the foreclosure fraud crisis: Notaries are the people who verify that someone actually is who they say they are when that person signs a document. Because banks and their agents industrialized “Document Execution” as part of their foreclosure business model, notaries did not do their jobs. Notaries’ failure to verify identities has been so complete that many people will sign as one person, say, “Linda Green.” Notaries have also been told to sign documents using one name, and then notarize their own “surrogate” signature. “Well, what’s the big deal?” bank defenders say. Beyond the fact that there’s no “business convenience” exception to following the rule of law, consider Bernal.

Bernal involved Texas’s requirement that all notaries be citizens; lawful permanent resident aliens need not apply. Bernal challenged the Constitutionality for the citizenship requirement. To rule on the question, the Court had to consider what notaries did, and whether or not what notaries did was so political, so central to representative democracy, that limiting being a notary to citizens was rational. In finding that notaries were important but not political officers of the state, the Court made some observations of note.

For starters, law-and-order Texas considers the notary job so important it’s in the Texas constitution, a fact the State emphasized in asking the Court to let it reserve the job for citizens. The Fifth Circuit Court of Appeals explained that in addition notaries were functionally part of the political community, as quoted by the Court:

“With the power to acknowledge instruments such as wills and deeds and leases and mortgages; to take out-of-court depositions; to administer oaths; and the discretion to refuse to perform any of the foregoing acts, notaries public in Texas are involved in countless matters of importance to the day-to-day functioning of state government. The Texas political community depends upon the notary public to insure that those persons executing documents are accurately identified, to refuse to certify any identification that is false or uncertain, and to insist that oaths are properly and accurately administered. Land titles and property succession depend upon the care and integrity of the notary public, as well as the familiarity of the notary with the community, to verify the authenticity of the execution of the documents.” 710 F.2d, at 194.

Responding to this argument on its way to saying lawful aliens could be notaries, the Court said:

"We recognize the critical need for a notary’s duties to be carried out correctly and with integrity. But a notary’s duties, important as they are, hardly implicate responsibilities that go to the heart of representative government. Rather, these duties are essentially clerical and ministerial To be sure, considerable damage could result from the negligent or dishonest performance of a notary’s duties."

Lender Processing Services (LPS) bases its business model in part on the industrialization of documentation production and execution. Nevada Attorney General Catherine Cortez Masto sued LPS over its practices, including “fraudulent notarizations.” She also indicted two individuals involved in LPS’s document execution factory Missouri Attorney General indicted LPS subsidiary DocX for 136 counts of forgery and making a false declaration related to mortgage documents. The AG noted these forged documents were notarized by DocX as well.

The Attorneys General for Nevada and Missouri aren’t the only public officials taking action because of the “considerable damage” that results from such “fraudulent notarizations”. The state officers in charge of land records have been speaking out and even suing over the damage caused. The two most recently filed actions are by North Carolina and Louisiana. In North Carolina, Register of Deeds Jeff Thigpen (Guilford County) filed suit against LPS, the bailed out banks and their creation, MERS. Thigpen said he wants the banks to “clean up their mess”, noting:

“It is unbelievably frustrating to expend County resources in an attempt to create an efficient, accurate registry and have these banks wreak havoc on our efforts through fraudulent documents and a secret registry [the MERS system]. If we don’t fix this now, the future impact on land records and property values could be severe and incurable.”

Earlier this week 29 Louisiana Clerks of Court filed a civil RICO suit–yes, a civil organized crime suit–against the bailed-out banks. The Clerks, who manage the land records, allege the banks conspired to use MERS to defraud the state of land recording fees. The Clerks allege that MERS misrepresents Louisiana law, and that MERS fails to work as promised. As a result, the Clerks charge, the parishes were owed fees every time a note was transferred but were not paid them.

The Clerks flag an important point: critical players in each mortgage backed security are not MERS members. Thus even if MERS did work as MERS claims for MERS member companies, once a mortgage loan reached a securitization process entity that was not a MERS member, even on MERS’s own terms, a mortgage assignment needed to be recorded. Although the Louisiana clerks focus on only the Trustee for the securitized trust, the special purpose entities in the securitization process were not MERS members either. Thus at least two, and often three, recorded assignments were needed for securitized mortgage to maintain the perfection of the security interest.

Notarization fraud was not limited to LPS or the bailed-out banks-as-motgage-servicers-as-MERS. Law firms also engaged in the garbage practice. Maryland notaries who participated were forced to take the Fifth when asked about it.

Despite LPS’s insistence that “improper” notarizations are irrelevant and “surrogate signing” legal, the indictments tell a different tale.

Note: Law enforcers have neither indicted or sued a single big banker for this conduct. If the low level folk focused on now are used to flip people up the chain, fine. But if not it’s hard to see how the US can continue to see itself as operating according to the rule of law.

And no, the practices aren’t harmless even if LPS insists they are. Title is clouded in many places, and in Massachusetts may be flatly invalid. Communities denied millions of revenue in troubled economic times are suffering needlessly.

The US Supreme Court recognized how crucial honest notary practices are nearly 30 years ago, as did the State of Texas. At the time, a fundamental issue was at stake–the basic freedom to participate in the common occupations of the community–but now something just as fundamental is too–our property rights and land records system. Worse, more is wrong than notary practices, though honest notaries could’ve stopped “surrogate signing” in its tracks.

Why aren’t all our law enforcers indicting people on a system changing scale?


Back to April 2012 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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