Guest Post: So Why Did the Mortgage Servicers Use “Robo Signers”?

I must say I was surprised and disappointed by the recent post at Calculated Risk Why did the mortgage servicers use “robo-signers”?  The post naively tries to separate issues with MERS and other “cost cutting, sloppy procedures” as if they aren’t related. So I won’t keep you in suspence.  Why did the mortgage servicers use robo-signers?  To save money. Pretty simple actually. As the famous quote goes, “Follow the Money.”

The mortgage industry couldn’t produce enough securities for investors fast enough and were too busy making money to do things like follow state and federal law or even the procedures outlined in their own contracts like the pooling and servicing agreement. And that’s the very same reason they use robo-signers to foreclose. It would cost them too much money and take too much time to track down the original documents and take a close look to see whether the facts they are submitting to court are truly accurate.

Ok.  So there’s your short answer. For a more fully formed explanation you should check out a guest post on the excellent blog Naked Capitalism.  MBSGuy had the same problem with the post that I did and wrote a well thought out response.

It is patently incorrect to say that the “foreclosure gate” issue is about “robo-signers”. A dozen top banks or servicers voluntarily halted foreclosure across much of the country because title insurers were no longer comfortable working on their foreclosure sales, borrowers were having increasing success challenging the foreclosures, their sub-contractors (such as Lender Processing Services and various foreclosure mill law firms) were being investigated for fraud and perjury, and news was starting to get out that the problems were much more widespread than had been previously reported.

The entire legal structure of foreclosure was coming undone. Robo-signers were just a manifestation of a much larger issue that was already becoming a problem.

People who believe that the foreclosure crisis issue is just about servicing are either new to the issue or unwilling to ask some obvious questions about what is going on. Certainly all aspects of process intensive work can be exposed to human error and mistakes, but you’d think the mistakes might be randomly distributed, rather than concentrated in the same parties and the same documents, over and over again in the same ways.

I believe that a reasonable examination of the facts shows that the documents were not prepared incorrectly due to mistake, but rather due to a strategic choice. …

The post also gets into why they need to submit false documents (an issue separate from why they have just one person signing 10,000 documents a month).

Having witnessed a servicer and its counsel lie repeatedly in a court where I was testifying, I can say with confidence that the incorrect statements they made were not mistakes. I wondered why they spent so much money to dispute our claim that the form of the note and mortgage were not in the proper form. If the servicer had just made a technical error, why didn’t they just go correct it and re-submit the foreclosure in the name of the party actually holding title (rather than the people they wanted to be holding the title)?

They submitted the documents to cover earlier mistakes in the origination process. If it is true that the servicing “mistakes” are correlated to the number of loans with conveyance problems, then it appears that the conveyance problem could be quite large.

So as usual, the cover-up will get the banks into as much or more trouble than the original crime.  Please take the time to read the entire post.

– Bob Godnik