Warren Works on Mortgage Disclosure; She Needs to Work on Foreclosure Fraud

Elizabeth Warren has gotten right to work in her new position, announcing at a Treasury forum the intent to simplify mortgage documents for homeowners:

“Disclosure isn’t going to solve all problems, but it is one of the most powerful tools we have for getting people better information so they can make better choices about how they borrow,” Geithner, 49, said at a Treasury forum today. The goal is to “figure out how to, starting with mortgages, bring a little more simplicity and clarity to the existing forms that are out there,” he said.

Warren, seated alongside Geithner, said the meeting with experts from consumer-advocate groups and lenders was aimed at getting ideas “about what information consumers need and when they need it to make the best possible financial decisions.”

This is excellent, and precisely what we want out of a Consumer Financial Protection Bureau. It needs to be teamed with harsh penalties for financial services companies who break the law. Advance America, the nation’s largest payday lender, try to foreclose on their homes without the titles. This major foreclosure fraud is about to blow out into the open after the revelations at GMAC Mortgage (now Ally Financial).

Some of the nation’s largest mortgage companies used a single document processor who said he signed off on foreclosures without having read the paperwork – an admission that may open the door for homeowners across the country to challenge foreclosure proceedings.

The legal predicament compelled Ally Financial, the nation’s fourth-largest home lender, to halt evictions of homeowners in 23 states this week. Now it appears hundreds of other companies, including mortgage giants Fannie Mae and Freddie Mac, may also be affected because they use Ally to service their loans.

As head of Ally’s foreclosure document processing team, 41-year-old Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.

In a sworn deposition, he testified that he did neither.

Ally Financial keeps calling this a technical difficulty, but it was a feature, not a bug. Jeffrey Stephan didn’t look closely at the affadavits because he would have learned too much; in fact, he was told not to. And he’s not the only robot signer, and Ally Financial isn’t the only mortgage company employing one. The go-go way in which mortgages were bought and sold, sliced and diced, will come back to haunt the servicers, who don’t own the homes on which they’re foreclosing. Ally only halted evictions in those 23 states because those are the ones which require a court order to evict. But this could collapse the entire foreclosure market nationwide, as well as the mortgage portfolios of practically every lender. This is a time bomb.

Paging Elizabeth Warren.