Dave Dayen and I talked about this Tuesday night on my radio show (click here to listen) and he goes into more detail in this American Prospect article yesterday. Think about all the revenue lost by your local county government because of this little shell game, the fact that the MERS system used instead of the traditional land-recording system may be illegal, and you'll understand why it's a big deal:
State and federal regulators have yet to stop mortgage-foreclosure abuses and exact punishment on the banks responsible for them. A slap on the wrist for 14 of the largest mortgage firms, a still fruitless effort by state attorneys general to reach a settlement with banks, and superficial investigations into the extent of the abuses have done little to answer questions about the proliferation of mortgage fraud. Without that knowledge, regulators are at a disadvantage in arriving at an equitable solution.
Enter the most unlikely players in this whole mess: unassuming elected county officials known as registers of deeds. Whenever a mortgage gets transferred from one owner to another or a home falls into foreclosure, documents of the transaction get filed at the county register's office. Much of the truth about systemic document fraud is sitting in these local offices. Until now, virtually no register of deeds had bothered to take a look.
But Jeff Thigpen, the register of deeds in Guilford County, North Carolina, a county of about 465,000 in the center of the state (the largest city is Greensboro), decided to survey all the mortgage documents submitted to his office by DocX, a notorious "mortgage mill" that processes documents on behalf of lenders, between August 2006 and April 2010. He was inspired by a 60 Minutes investigation revealing numerous forgeries, backdating, and other false information on mortgage documents. "When I saw that [story], I was basically on fire," Thigpen says. "'I know this material is in my office, I've got to find it, I've got to get it out.'"
Out of the 6,100 documents Thigpen examined, 4,500 showed signature irregularities. The name of one DocX employee, Linda Green, who was acting as a vice president for several major banks, was forged 15 different ways on the Guilford County documents, rendering them invalid. Thigpen's investigation was one of the first systematic assessments of mortgage document fraud in the entire country, certainly more robust than anything conducted by state and federal regulators.
Thigpen was elected as the Guilford County register of deeds in 2004, during "the steroid era of land records," as he describes it. Mortgage securitization has been around since the 1980s, but it became widespread as the housing bubble inflated, when banks sliced up subprime mortgages into securities and sold them to global investors as an allegedly safe product. To reduce costs, the banks invented and funded the Mortgage Electronic Registration System (MERS), an electronic registry that allowed banks to circumvent county registers and thereby avoid paying the recording fee of roughly $35 per mortgage.
Go read the rest, it's fascinating.