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A foreclosure sign sits in front of a home. Errors are being made in the process that lead lenders to foreclose on homes.
In a quiet office in downtown Charlotte, N.C., dozens of Wells Fargo’s foreclosure foot soldiers sit in cubicles cranking out documents the bank relies on to seize its share of the thousands of homes lost to foreclosure every week.
They stare at computer screens and prepare sworn affidavits that are used by lenders in courts across the country to seize homes. Paid $30,700 to start, these legal process specialists, the title that goes with the job, swear an oath under penalty of perjury that they're corporate vice presidents. They're peppered with e-mails from managers to meet daily quotas of at least 10 or 11 files day.
If they fall short, they face a verbal warning. Then written. Two written warnings could cost them the paycheck that supports a family. As more than one source for this story told msnbc.com, "I can't afford to lose this job."
Pressured to meet daily production quotas, they are likely making mistakes that inadvertently could toss a family out of its home and onto the street, according to these workers.
State and federal prosecutors, in a recent settlement with five banks that included Wells Fargo, agreed. The joint state and federal settlement spelled out how the document procedures at the five banks resulted in “loss of homes due to improper, unlawful or undocumented foreclosures,” according to the complaint.
"These are mistakes that could cost someone their home," a Wells Fargo document preparer told msnbc.com.
The Wells Fargo worker, who first contacted msnbc.com via email in late January, told of a wide range of concerns about the foreclosure documents she processes. Some families apparently were denied loan modifications after only cursory interviews, she said. Other borrowers applying for help sent comprehensive personal financial documents to a fax machine that she discovered had been unattended for weeks. Others landed in foreclosure after owing interest payments of as little as $1.18 a day, according to documents she said she reviewed.
The legal process specialist asked not to be identified because she was not authorized to speak about the internal workings of the department, where she has worked since last year. Her account was supported by company documents and by a co-worker in the same office.
"There was one file where they weren't even past due and they were in foreclosure status," the loan processor said. "They're pushing these files and pushing these files....”
Five years into the worst housing collapse since the Great Depression, the foreclosure pipeline that is removing tens of thousands of families from their homes every month rests on a legal process that has been badly compromised by errors, misrepresentation and outright fraud, according to consumer attorneys, state attorneys general, federal investigators and state and federal judges.
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Sweeping enforcement actions a year ago by the nation's top banking regulators, and a recent settlement among 49 state attorneys general, the Department of Justice and other federal agencies with the five biggest mortgage lenders, were supposed to fix the system. Mistakes are likely still getting through, according to Wells Fargo employees.
Lenders claim that wrongful foreclosures based on paperwork errors are exceedingly rare. But unless that paperwork is challenged in court, there is no way a borrower would know a mistake had been made, or whether the lender had even proved it owned the loan and had the right to foreclose. Half the states use “non-judicial” foreclosure procedures, in which home seizures are subject to limited or no review by a judge.
“We have an adversary system,” said New York State Supreme court Judge Arthur Schack, who has rendered harsh opinions and sanctions for improper and fraudulent foreclosure documents. “So if someone doesn’t challenge it, it’s going to go through.”
Michael DeVito, executive vice president of Wells Fargo’s Home Mortgage Default Servicing, says the bank's processes are built to catch errors: “It’s got redundant checks in it to ensure that the documents going out the door are accurate. And the process is built to help the team member build the personal knowledge they need to sign effectively."
“No one here is asked to sign anything they don’t understand. Period. End of Story," DeVito said. "There’s no production quota and if a team member says, ‘I don’t understand this I’m not going to sign it,’ that’s fine.”
But people who work at Wells Fargo’s office at 401 South Tryon Street in Charlotte said some managers are pushing loan processors to fill workload quotas that don’t allow enough time to thoroughly review documents.
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“They’re pushed to do numbers," said a manager at the office who wished not to be named, referring to a department different from her own.
“My department is much more lax,” she said, “but (in that team) they’re pushing: ‘Get ‘em out, get ‘em out, get ‘em out, get em out.’”
This pressure to produce is spelled out in company e-mails to loan processors that were obtained by msnbc.com.
11 a day
One manager, in a daily "3 p.m. pulse check" e-mail reminded her team recently that "we need 11 new signed notarized files per reviewer per day," reminding the staff that "I asked that you take a few files at a time to be signed [and] notarized; it does not appear we are following this process."
On other occasions, the reminders can be more pointed. When a backlog of 59 files needed to be completed by 11 a.m. the next day, another manager e-mailed his team: "No one should be doing anything other than [these] files. No socializing, no going for breakfast, no doing [other] files ... until we are done with [these files]. It is that important. Help me out with this. If you finish all [the] files in your pipeline, you are expected to ask me for more.”
Last December, with just a few working days left in 2011 and the pressure on to churn out the paperwork required to seize a batch of homes in Kentucky and Connecticut, one of the managers sent an e-mail urging his team to "finish this year strong."
"You must sign at least 10 NEW files every day,” the e-mail said. “Less than 10 is unacceptable.”
At least once a month, the work week stretches to Saturday.
"Happy Saturday everyone," one manager greeted his staff in an e-mail before one such weekend session began. "We need to stay focused, keep the socializing to a minimum and get the job done. We are behind and must bring in a good number today. 6 hours and no lunch. Everyone is expected to get 8 new files signed today. No less.”
DeVito, who is based at the mortgage division’s headquarters in Des Moines, Iowa, recently visited the Charlotte office after msnbc.com asked the company for comment on this story.
“We take the concerns that have been raised to you and to us extremely seriously,” DeVito said after that visit. “And we’re going to go back and look at how our managers are communicating (with their employees.)”
In individual consent judgements, Wells Fargo and four other big banks have agreed to sweeping new standards in processing foreclosures. The agreement, approved April 5 by U.S. District Judge Rosemary Collyer, gives the banks 90 days to develop a plan to adhere to the new standards and 180 days to implement those plans. Until then, Americans losing their homes to foreclosure have little assurance that the seizures and sales are proper.
Many of them will lose their homes to Wells Fargo. So far this year, there have been more than 575,000 new foreclosure filings in the U.S. and more than 200,000 properties sold, according to RealtyTrac, which tracks national foreclosure data. Last year, Wells Fargo became the nation’s largest servicer of residential mortgages, with a $1.8 trillion loan portfolio and a 17.7 percent share of the market.
Entry-level vice presidents
Legal processing specialists sign affidavits in the presence of a notary and swear "under the penalty of perjury to the best of my knowledge, information and belief that the contents of the foregoing paper are true."
To meet legal requirements of state foreclosure laws, the document processors at Wells Fargo’s Charlotte office sign their affidavits as “Vice President of Loan Documentation.”
DeVito said the company’s board of directors has granted all document processors the title, a practice that corporate governance experts say confers on them the legal authority to sign documents as corporate officers.
Entry-level legal process specialists earn between $30,700 and $53,300 a year, according to recent internal job postings. Though basic qualifications in those postings call for one or two years of administrative experience, Wells Fargo says these entry-level workers have the training and expertise to satisfy state requirements that corporate officers review all foreclosure files.
Document processors typically have several years of experience in mortgage document processing, according to Vickee Adams, a Wells Fargo spokeswoman. They also undergo online training and have to pass a test before being authorized to sign affidavits as vice presidents, she said.
Concerns about document preparation at Wells Fargo and other major lenders first came to light nearly two years ago.
Investigators at the Department of Housing and Urban Development, who are charged with finding "waste fraud and abuse" among lenders filing claims for payment when a federally-insured mortgage defaults, checked into problems at all five big banks after reports surfaced in 2010 of widespread document fraud.
Those investigators reported last month that Wells Fargo document processors had “signed the great majority of the judgment affidavits without personal knowledge or otherwise verifying the data and information.”
That investigation took place in the fall of 2010. But the Wells Fargo employees who spoke to msnbc.com on condition they would remain anonymous said those practices persist in the Charlotte office.
Their knowledge of a foreclosure filing is limited by a process that relies on data provided by a third party vendor and based on documents they don't always have time to review, according to the employees.
As they prepare each affidavit, which carries the same legal weight as sworn testimony by a witness in a courtroom, document processors are tasked with certifying two basic claims that Wells Fargo makes before it sends a homeowner out onto the street. The first includes the bank's detailed accounting of what it claims the borrower owes in back payments. The second claim requires that processors sift through the paper trail that shows Wells Fargo has the legal right to seize a home.
Companies that manage mortgages typically collect only a small fee for each loan that is current. But loans in foreclosure generate a laundry list of foreclosure-related revenues, including legal fees, late charges, back interest, home inspections and maintenance. Last year, Wells Fargo earned $3.3 billion in profits from its mortgage servicing business, or about 20 percent of the bank’s total net income, according to its annual report.
The accuracy of a homeowner's final default accounting is critical. If a borrower can raise the shortfall by either tapping savings or obtaining a personal loan from family or friends, the default could be corrected.
But Wells Fargo uses a process to certify the official accounting that doesn't give many of their document preparers enough time or information to make sure it's accurate, according to the employees.
Like many mortgage servicers, Wells Fargo relies on a company called Lender Processing Services to assemble some of the information used to foreclose on properties.
With each file they prepare, the bank’s document processors must swear “personal knowledge” that the information in each affidavit was properly collected and is accurate and complete.
But they have no way of making good on that promise because they are not able to check whether LPS properly collected and processed the data, according to the document processor.
"We're basically copying and pasting" information from the LPS system, she said. "It's data entry. We just input (on the affidavit) what's on that system. And that's it. We don't go back through system and look."
If they were able to take a closer look, Wells Fargo's document processors might be surprised at what they found.
In December, Nevada Attorney General Katherine Cortez Masto sued LPS alleging that the company had forged documents, forced attorneys to churn through foreclosures sacrificing accuracy for speed, and required workers to notarize up to 4,000 foreclosure-related documents a day.
LPS moved to dismiss the lawsuit, saying it failed to show that any document “executed by subsidiaries of LPS was incorrect, contained errors, or caused any borrower financial harm.” It said the allegations were based on “misguided legal conclusions and inflammatory rhetoric.”
LPS also was among the companies cited by federal regulators in April 2011.
DeVito said Wells Fargo has multiple accounting checks in place, including a second review of signed affidavits, which catch any mistakes in the LPS system that could result in a wrongful foreclosure.
But the loan processor said not all files are subject to that level of scrutiny in the Charlotte office.
Secretary of Housing and Urban Development Shaun Donovan discusses the details of the Obama administration's $25 billion settlement with banks for alleged foreclosure abuses.
"We're not calculating out each fee," the processor said. "We're not going through their payment history and making sure that every figure is correct. That would take too long.”
Lawyers defending homeowners in foreclosure say they're well aware of the problem.
"These people simply do not have personal knowledge, as required by the rules of evidence, about the business practices or processes that they're signing affidavits with respect to," said Max Gardner, a Shelby, N.C. bankruptcy attorney who has trained hundreds of other lawyers across the country defending homeowners in foreclosure. "They just don't. And that's the fundamental problem with it."
Who owns the loan?
Once the document processors have cut and pasted the bank's accounting of fees on the affidavit that will be used to seize a home, they then review the paper trail that gives Wells Fargo the legal right to take a borrower's property. Verifying that a mortgage has been properly transferred from one lender to another can be vexing.
In the frenzy of mortgage lending in the mid-2000s, when hundreds of now-defunct lenders churned out a blizzard of mortgages that were quickly sold off to investors, the paper trail of ownership was sometimes badly scrambled, according to consumer attorneys defending homeowners in foreclosure cases. Some of those attorneys are successfully attacking lenders’ effort to paper over missing links in the chain of documents that establish who owns a mortgage.
In some cases, the transfer process relies on a widely-used third party, known as the Mortgage Electronic Registration Systems, Inc. or MERS, which was also cited in last year's enforcement action by federal regulators. The system was designed to bypass the costly and time-consuming process of recording mortgage transfers at county or town clerks' offices. Critics of the system, including state prosecutors who have sued MERS, have argued that it doesn't provide an adequate paper trail to prove who actually owns a mortgage. MERS has disputed those complaints and has also won some important court victories upholding its legal standing in transferring mortgages and establishing ownership of a loan in foreclosure.
In other cases, when mortagages aren't registered on the MERS system, Wells Fargo loan specialists in the Charlotte office have to verify ownership by reviewing images scanned into their computers. In theory, all relevant, original documents are available for review. But it's not unusual for a critical piece of paper to be missing, according to employees at Wells Fargo’s Charlotte office.
Locating the original document could require ordering it up from a storage warehouse in a different location, which "would probably take you forever," said the loan processor. Strictly-enforced production quotas often make it all but impossible to devote the time needed to verify each file, she said.
Banks were ordered a year ago to fix error-prone document systems and procedures, after a sweeping enforcement action last April by four of the nation’s top bank regulators. Fourteen mortgage-related firms, including Wells Fargo, LPS and MERS, signed consent orders with bank regulators. At the time, Wells Fargo agreed to “ensure that all factual assertions made in pleadings, declarations, affidavits or other sworn statements” are “based on personal knowledge or a review of the Bank’s books and records.”
But lenders' disregard for the law is still rampant, according to consumer advocates and regulators. Lawyers defending homeowners against foreclosure say the process in some states has been so corrupted that faulty and fraudulent documents have become commonplace.
In February, the National Consumer Law Center surveyed some 260 consumer attorneys in 45 states, who reported that thousands of homeowners were improperly foreclosed on in just the past year. In four out of five cases, the attorneys reported, lenders failed to properly credit payments or they wrongly claimed homeowners owed bogus fees.
In February, an audit by the San Francisco assessor’s office of 382 foreclosure cases over the past three years found “one or more irregularities” in 99 percent of the loans and “what appear to be one or more clear violations of law” in 84 percent of the loans.
Concerns about widespread foreclosure abuses were echoed recently by Sarah Bloom Raskin, a Federal Reserve governor, who urged that "the severe misconduct that has been uncovered in the mortgage servicing sector be addressed through intensified public enforcement of the law."
"The dockets of federal courts, bankruptcy courts, and state courts include numerous cases involving a wide range of troubling issues," Bloom Raskin told a gathering of law professors at the annual meeting of the Association of American Law Schools in January. Those issues, she said, include claims of forged and missing documents and allegations that homeowners were being overcharged.
Wells Fargo insists that the bank has fixed the problems identified by regulators and state and federal prosecutors.
“There have been a number of voluntary actions within Wells Fargo … to address those issues aggressively through investment in technology and through investment in the work force,” said Adams, the spokeswoman. “So there have been a number of adjustments and in fact a number of our adjustments preceded the regulatory requirements.”
The Notary Room
But the Wells Fargo loan processor says those adjustments haven't overcome a work environment that often prizes speed over accuracy for some teams.
Employees who arrive every weekday morning pass a long, unstaffed reception desk in front of a large "Wells Fargo" sign in red and gold, to enter a yellow-carpeted space furnished with high-walled cubicles, she said.
The phones rarely ring. It's quiet but for the sound of clicking keyboards. Workers stare at their screens, listening to music via iPod earplugs to better concentrate on the task at hand. Brief conversations between co-workers are interrupted hastily as soon as a manager walks by.
The nine-hour workday includes a lunch break of up to an hour, along with two additional 15-minute breaks, though some smokers in the group take more. From the break room, you can look out over the nearby rooftops and apartment buildings to see traffic flowing around Charlotte's downtown on the Interstate 277. A TV is typically tuned to CNN.
The conference rooms are named for warm, sunny destinations: St. Thomas, St. Kitts and Belize. From time to time, managers summon the staff to one of these rooms to review the latest performance numbers.
Once the loan process specialists fill out the information in a standard affidavit template, they sign it before a notary, a public official licensed by each state to perform legal functions that include administering oaths and witnessing signatures on documents.
In the Charlotte office, that means a trip to a separate room where a handful of notaries sit all day behind a few small desks with lamps. Much of their time is spent reading a newspaper or a book or playing with smart phones while they wait for the next legal processes specialist to stand before them, swear that the affidavit they've just filled out is true, and sign it.
"It's exactly like an assembly line," said the loan processor in that office. "You sign it, you push it off to a notary, they stamp it, you put it in a box and it goes somewhere else."
Judges rely on these affidavits to approve home seizures by lenders.
"These are not technicalities, if you're going to take someone's home," said Schack, the New York State judge, speaking generally about the foreclosure process. "We've got something called due process of law. And you've got to play by the rules. "
Those rules require that an attorney be given the opportunity to challenge any piece of evidence presented to the court. But because the Wells Fargo legal process specialists are rarely available for cross-examination, that test is very hard for a homeowner's attorney to apply.
"An affidavit, to be admissible, has got to meet the same test as if a witness was really in court in the box testifying," said Gardner.
The Wells Fargo legal process specialist said she has not been called once to testify in court to the accuracy of her work in the past six months. Court appearances by her co-workers are a rare event, she said.
Asked if she could she explain to a judge how she had obtained personal "knowledge, information and belief" that the documents she prepares are accurate, she said, "I wouldn't even feel comfortable answering that question."
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