HSBC

Why Did the OCC Let HSBC Off For $249 Million?

By Lynn E. Szymoniak, Esq., January 19, 2013

To judge the reasonableness of the most recent foreclosure fraud settlement announced by the OCC, it is important to consider HSBC’s role in foreclosure fraud.

HSBC Bank USA, N.A. acted as Trustee for several hundred mortgage-backed trusts. This means that ultimately the mortgage servicer was paid by and answerable to HSBC as Trustee. HSBC served as Trustee for the following series of trusts, among others:

Ace Securities Corp. Home Loan Trusts
Deutsche Alt-A and Alt-B Securities Trusts
Fremont Home Loan Trusts
GSAA Home Equity Trusts
Nomura Asset Acceptance Corporation Trusts
People’s Choice Home Loan Trusts
Renaissance Equity Loan Trusts and
SG Mortgage Securities Trusts

These trusts had very high default rates. In South Florida, HSBC as Trustee filed thousands of foreclosure cases from 2008 – 2012.

A few weeks before or a few weeks after filing these cases, the mortgage servicers for these trusts filed Mortgage Assignments in the county official records so that these trusts could prove ownership of the mortgages they were seeking to foreclose. In most cases, the bank lawyers filed a related pleading in the foreclosure case, most often titled “Notice of Filing Original Note and Mortgage Assignment.”

In all but a handful of cases, however, these Mortgage Assignments were not part of the mortgage documents obtained and maintained by the trusts. These were not “original” Mortgage Assignments. The vast majority of these trusts closed in 2004, 2005 and 2006. The mortgage assignments should have been executed in those years (or ownership transferred to the trusts on the MERS system during those years).

The vast majority of the assignments filed in the county official records and in the related foreclosure cases were not prepared and executed until well after 2008. They were not signed by employees of the original lenders, but by employees of the mortgage servicers for the trust or employees of the law firms handling the foreclosures.

Scott Anderson of Ocwen Loan Servicing was one of the most frequent signers. Astute King’s County, New York, judges have already identified Scott Anderson as a frequent signer of questionable mortgage documents. He has already admitted that he authorized others to sign his name on witnessed and notarized documents.

Cheryl Samons, the former officer manager for the law offices of David Stern, was also one of the most frequent signers. Sterns’ offices were closed down after Andy Kroll writing in Mother Jones, among others exposed the Stern firm for its shoddy and fraudulent practices.

Linda Green, Tywanna Thomas and other DocX employees were also frequent signers. 60 Minutes exposed the fraudulent practices at DocX in an award-winning segment. Lender Processing Services owned DocX. The former president of DocX and a senior officer of Lender Processing Services, Lorraine O’Reilly Brown, is facing sentencing after pleading guilty to conspiracy to commit mail fraud relating to these
mortgage document practices. Employees of Lender Processing Services office in Minnesota also regularly prepared and signed these documents for HSBC trusts.

Denise Bailey and Marti Noriega from Litton Loan Servicing signed hundreds of these documents. Goldman Sachs owned Litton so Bailey and Noriega’s names show up in particular on documents for the GSAA
(Goldman Sachs Alternative A) trusts. (Goldman Sachs sold Litton to Ocwen in 2011.)

In total, South Florida mortgages worth several billion dollars were transferred to HSBC trusts for foreclosure from 2008 to 2012. These documents were not in any way limited to South Florida. These same documents, signed by Scott Anderson, Linda Green, Marti Noriega, etc. were used to foreclose nationwide to transfer at least $10 billion of mortgages to the HSBC trusts.

So why did the OCC agree to let HSBC off the hook for these multibillion dollar foreclosure fraud acts for $249 million? Why would the OCC settle without requiring HSBC to notify homeowners, courts and county recorders that fraudulent assignments to trusts were filed?

One plausible explanation for this settlement was that the OCC was seeking to be consistent with its past enforcement actions against banks for foreclosure fraud.

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