Whistleblowers Explode Foreclosure Crisis

By Kevin Chiu

Working at a feverish pace to keep up with a record volume of foreclosures, bankers, attorneys and bank servicing companies have allegedly broken laws to foreclose on at least tens of thousands of homeowners. But only over the last six months have the sorted details of the four people that have made the foreclosure scandal front page news come to light. As it is clearly turning out, these four are the whistleblowers in America’s foreclosure crisis.

In May 2010, Beth Ann Cottrell, a JP Morgan Chase & Co. employee testified during a court ordered disposition in Florida that she did not have her “own personal knowledge” of the accuracy of foreclosure documents as she signed thousands of foreclosure papers a month. Cottrell admitted that she verified affidavits without actually having personal knowledge statements were true, providing the necessary paperwork for courts to order foreclosures.

Cottrell also admitted during the disposition that she signed documents on behalf of other companies without having first hand knowledge after she received a power of attorney to do so.

court procedures

Another lender’s employee, Jeffrey Stephan working for GMAC Mortgage, which has since changed its name to Ally Financial, testified in a separate case in Maine a month later that he signed up to 10,000 foreclosure documents a month without verifying the accuracy of the information contained in them. Stephan also testified that the paperwork was signed without the presence of a notary public, who later affixed her signature to the paperwork.

In another case in Seattle, Washington a Wells Fargo employees, Herman J. Kennerty testified he signed documents to foreclose on homes without checking anything accept the dates to make sure they were correct to file the documents in court in a timely manner. The three provided the mechanism for their banks to foreclose on property and repossess it from homeowners who had supposedly stopped making mortgage payments. But all three admitted that they had no such first hand knowledge.

The testimony shows a strong pattern of disregard for judges handling foreclosure cases, who customarily rubber-stamp documents and approve foreclosure cases based on the legal documents, provided them to foreclose on property. The testimony has prompted all 50 states Attorney Generals to open investigations into so-called “robo-signers” in which employees like these three sign their names as ordered by bank officials with little regard to the technical regard for law.

But perhaps the most bothersome of all testimony to come to light in recent weeks is that of a law firm’s employee in Florida, which is under investigation for fraudulent foreclosure practices. The nation’s mortgage giants, Freddie Mac and Fannie Mae have pulled foreclosure requests from the firm of attorney David J. Stern, who authorities charge has been running a “foreclosure mill.”

Stern is paid an average of just $1,100 a foreclosure for filing the paperwork to foreclose on properties, and has filed hundreds of thousands of foreclosures for Bank of America, Freddie Mac, Fannie Mae and defunct Countrywide Mortgage, according to the firm’s employees.

A legal assistant for the law firm, Kelly Scott testified that sometimes missing documents required to proceed with a foreclosure would be replaced in files when “they were needed,” and signed by the office manager of the foreclosure department, who “doesn’t review them.” Scott testified that due to the heavy volume of foreclosures the manager taught others to “forge her signature.”

Intentionally or unintentionally these four employees have landed in the forefront of the foreclosure crisis as participants in what may turn out to be banking’s second biggest scandal, behind producing the mammoth bubble of money to make mortgages to anyone who could sign their name.