March 12, 2014 | 2:06pm
Wells Fargo, the nation’s biggest mortgage servicer, appears to have set up detailed internal procedures to fabricate foreclosure papers on demand, according to allegations in papers filed Tuesday in a New York federal court.
In a filing in New York’s Southern District in White Plains for a local homeowner in bankruptcy, attorney Linda Tirelli described a 150-page Wells Fargo Foreclosure Attorney Procedures Manual created November 9, 2011 and updated February 24, 2012. According to court papers, the Manual details “a procedure for processing [mortgage] notes without endorsements and obtaining endorsements and allonges.”
Those are the technical terms for the paperwork proving that the company that’s foreclosing owns the loan, and therefore has the right to kick a family out of its home. Wells Fargo services roughly 9 million home loans, according to Inside Mortgage Finance.
A Wells Fargo spokesman denied that the manual could be used to order improper documents. “No note is endorsed without the proper authority,” he said. “Wells Fargo’s foreclosure processes—today and back in 2012—are legal [and] appropriate.”
Attorneys, forensic accountants and consumer advocates have long suspected that banks were systematically creating improper documents to prove ownership of loans. Foreclosure defense lawyers use the term ‘ta-da’ endorsement to describe situations in which they say a document appears, as if by magic, in the bank’s possession as needed in a foreclosure case—even though the proper endorsement was not included in the original foreclosure filing. It might sound like a technicality, but correct proof of ownership lies at the heart of the foreclosure crisis for securitized loans, which were sold by the lender that originally issued the mortgage. To legally transfer a securitized loan, the endorsements and allonges have to be created in a very specific way and within a specific time frame, usually 90 days after a residential mortgage trust closes. For many loans in foreclosure now, which were originated years ago and then sold, it’s way too late to correct incomplete documents, experts said.
If the allegations in Tirelli’s court filing are true, this manual represents the first time ‘ta-da’ endorsements are “being described and admitted to be a procedure” at a major bank, as Tirelli claimed to The Post.
The manual, a copy of which was obtained by the Post, appears to provide step-by-step instructions for a Wells Fargo Home Mortgage “Default Docs Team” and foreclosure attorneys if a blank endorsement is in a file and the attorney wants that note executed. In addition, the manual outlines steps for attorneys and the Default Docs Team to create allonges, endorsements to a note on a separate sheet of paper when there is no room left at the bottom of the note. Step 3 under the header “Allonge” on page 17 reads: “WFHM Default Docs Team: If file was ordered and received, review … to determine what entities the attorney needs the note endorsement to reflect.”
Foreclosure experts called these procedures shocking.
“It’s an explosive document,” said forensic accountant Jay Patterson. “It creates doubt as to whether an endorsed note was actually done when it was supposed to be done years ago, and they didn’t just order it to prosecute the foreclosure.”
The Wells spokesman said the manual has been updated more than 30 times since February 2012 to reflect “changing laws, regulations and foreclosure procedures.” He said that it includes “only the information our attorneys need to know” and excludes details on internal checkpoints and processes.
In another local foreclosure case, Tirelli included another bombshell document, a Wells Fargo Home Mortgage order form in the filing. This form appears to allow Wells staffers to check a box to order a “Note Endorsement Team” to endorse a note in blank.
Wells’ spokesman denied that this form could be used to order improper documents.
The questions raised by foreclosure experts about the Wells Fargo documents, however, come on the heels of whistleblower accounts of failures to prove ownership, and document fabrication. An article published on MSNBC.com in April 2012 detailed alleged failures in a Charlotte, N.C. Wells Fargo office to properly verify ownership of loans, and a March 2013 piece on influential finance blog Naked Capitalism described allegations of widespread tampering with foreclosure documents including mortgage notes at a Wells Fargo office in Minnesota. Wells Fargo declined to respond to the Naked Capitalism article, and told MSNBC.com that the company had protocols in place to ensure the accuracy of foreclosure papers.
When this Attorney Procedures Manual was in effect, Wells Fargo was finalizing a settlement with regulators over alleged foreclosure abuses including false documents. On Feb. 9, 2012, Wells and four other major banks settled with 49 state attorneys general and the federal government for $25 billion over foreclosure practices. The complaint accused the banks of “preparing, executing, notarizing or presenting false and misleading documents” and alleged “loss of homes due to improper, unlawful or undocumented foreclosures.”