How One Local Official in North Carolina Is Trying to Hold Wall Street Giants Accountable for Widespread Fraud
When Wall Street hustlers figured out a scheme to make a fortune trading home mortgages in the 1990s, they faced some legal obstacles. In some cases, like dealing with the Depression-era law that kept commercial and investment banking from mixing, they overcame those obstacles with tens of millions of dollars of lobbying.
But having gotten their deregulation, they simply broke other laws. What the banks and a compliant media often euphemistically refer to as a series of “paperwork errors” in transferring deeds ("robo-signing”) was in fact widespread fraud – fraud that undermined bedrock property laws dating back for centuries.
When Jeff Thigpen, the Register of Deeds in Guilford County, North Carolina, looked at his own records, he found 6,100 questionable titles that were “signed in the names of known robo-signer aliases: 'Linda Green,' 'Christie Baldwin,' 'Pat Kingston,' 'Korell Harp,' 'Jessica Ohde,' 'Rita Knowles,' 'Linda Thoresen,' and 'Brent Bagley'” – and that was in just one county in one state.
Thigpen has a strong belief in the rule of law, and thinks it should apply to everyone, including the titans of Wall Street. Earlier this month, he filed a suit against some of the nation's biggest banks, demanding that they clean up the mess they created. “For me, the question is clear,” said Thigpen, “Do we want land records in America to be governed by major banking conglomerates on Wall Street or the people and laws of the United States of America?”
This week, Thigpen joined Joshua Holland on the AlterNet Radio Hour. The transcript below has been lightly edited for clarity (listen to the entire show here).
Joshua Holland: Now, you’re suing some of the biggest banks in the country for basically running roughshod over the law. I want to start with some basics here. Among the defendants in your case is an entity called MERS -- the Mortgage Electronic Registration System. What is MERS, Jeff?
Jeff Thigpen: MERS was an organization that was created about 15 years ago. It was a combination of Fannie and Freddie and banks that bought into the concept of how they could record information that would allow them to expedite the securitization process and also to get around county recording offices that up until that time were where a lot of information about our land records was stored. It really became a foundational change in the way we’ve done land records in the United States.
JH: In the suit you mention that the recording for land titles in North Carolina goes all the way back to 1664, and this basic property law -- that you maintain a chain of title so that you know who has owned a property -- is really English Common Law. This is bedrock stuff. We had on economist Dean Baker a few weeks back, and he made a point about how MERS really shows the banks' hubris because they wanted to bundle up a large number of mortgages into securities and sell them off to investors. And maybe the process of dealing with all the paperwork at the county level was cumbersome -- maybe that's true and maybe it could be streamlined -- but instead of saying 'let’s change the law.' they just decided to go all the way around it.
JT: That’s part of the thing. This is an issue as far as I’m concerned related to some foundational things. It’s about democracy, it’s about the rule of law, and it’s about good fundamentals in our economy. What I mean by democracy and the rule of law is that hundreds of years ago, when our forefathers and mothers and sisters were coming from what I call the original too-big-to-fail -- the English monarchy -- they came to the United States because there were so many problems with the transfer of property because of the monarchy and everything else in England. So they decided, hey, let’s appoint a Secretary of the Register, some institution in the United States that would allow us to be able to follow these transfers, because it’s so foundational.
What’s happened is that 13th-century property laws have now collided with the 21st-century finance and what’s gone on in the past 15 years. I call it the "steroid era" in the financial services industry. It was about securitizing these loans in a way that at every point in the process people made a whole lot of money, and while they were doing all that they lost track of basically who owned what.
As a result of that model three years coming out of the worst recession since the Great Depression and the housing crash -- it’s almost like that movie The Hangover where people go out and have a good time and then wake up the next morning and a tooth is missing, there’s a tiger in the room, and they’re trying to figure out what happened.
We have to have these accurate records. If we don’t have the accurate records and the certainty, clarity and transparency that comes through a property records system in a democracy then we have a very big problem. That’s why you’re seeing so much litigation that has come up. A lot of these counties are beginning to sue MERS and they’ve been investigated by two attorney generals.
If they would have early on started with a model that said 'we’re going to go to the 50 states and get enabling legislation; we’re going to work with county recorders to modernize our records' and do things like that it would have been one thing. They didn’t do that. They went out and created this other institution, and now we’re living with the collateral problems from it.
JH: Now I’m going to return to the context in one minute, but I first just want to get the scope of the lawsuit. You go in as the Register of Deeds in Guilford County and you dig into the records. Tell me what you found when you dig into your own records.
JT: Back in April of last year I was sitting on my couch and I was watching "60 Minutes." There was a piece called "The Mortgage Mess," and what I saw was a lot of documents that were in my office. I got this very uneasy feeling that if I looked in there I might find documents that were signed by -- in that "60 Minutes" piece it was somebody named Linda Green who was a “vice-president” for 15-20 banks making $7 an hour and who got her job from working at an auto parts store.
The reason they used her name was because it was easy to spell. They could spell it quickly. What I began to see was the way in which they had farmed out the signing of the documents that were supposed to be filed in my office was violating not only notary laws, but you had forgery and fraud and all kinds of implications when you have people signing for one another.
Lynn Szymoniak, who was an attorney who was on that piece, connected with me probably within a week after the show. We began a conversation about how I can find these documents. They weren’t easy to find. Long story short is we pulled book and page numbers of these documents and then got images. I had 10 or 11 staff sorting them out by signature. Then we looked at variations of signature. What we found was I think 4,519 documents -- "Linda Green" had 15 different signature variations in the documents. We had a bunch of others that carried a lot of signatures that were just not the same signatures throughout the document. Based on that and the admission of people on "60 Minutes" saying they were signing for each other and notarizing these documents for one another it was classic forgery and fraud here.
So the question is, what do you do then? We pooled all that information together and gave it to the 50 state attorney general investigation and federal regulators. And what we’re saying in our lawsuit is basically three things. We want an investigator to look into our records and find the extent of this problem. We want the banks and the people listed to fix it. We’re not asking for $100 million; we’re asking for corrected documents to stand by. For 4,519 people, who paid good money to get their paperwork done right, they didn’t get their paperwork done right. Of course the last thing is don’t do this anymore. We need to stop this kind of way of transacting commerce.
Basically what we’re saying is we want them to stop this whole industry of robo-signing. What we want to do is rediscover and recommit to having transparency, clarity, and as a result of doing that we can get the certainty which all of us want in these land transactions. The byproduct will be that it tells the American public that we actually do believe in the concept of transparency and fair dealing in these transactions and we need to begin to rebuild trust, particularly as it relates to a lot of these people who are indicated in the suit.
JH: Now I don’t know how big the budget is for Guilford County government, but is this not beyond your scope? Don’t you need some help with this as far as just basic resources go?
JT: Absolutely. Forty-eight states of the country have budget problems. Guilford County in North Carolina is no different. We were able to find these documents, the 4,500, but it may by no means be all of it. I think our position is basically that this is almost like an environmental spill. Basically if you break it, you fix it. If you spill it, you clean it up, and you pay to do it. We’re saying you all submitted these documents, and we want you to fix it. We will assist as best we can, but the suit basically says it’s their problem and they need to take care of it. By doing that they’re going to be helping us get the public record straight and fix it. Right now we believe there’s a big problem.
JH: Jeff, let me ask you this. Down on the ground a lot of listeners may not be experts in real estate law. How does the fact that you don’t necessarily have good, trustworthy titles to a lot of properties in Guilford County affect homeowners and homebuyers when you have this questionable chain of title? How does this play out in the real world?
JT: People make mortgage payments to pay off their properties. As it’s gone in history you can go back and look at public records and be able to figure out who owns the property from 1771 in Guilford County to the present. When you have clarity and transparency in that it helps buyers and sellers and lenders, it helps consumers know the rights in property transactions. As a result of that it makes the transfer and enjoyment of the property that you have easy. Property is the child of the laws you live under. You don’t own anything without a system of laws that protect your rights to enjoy it. If you don’t have those kinds of laws in place you just have people who occupy land.
When the system has problems in it at this level there’s no confidence or risk-taking. Commerce stops. A lot of the reasons the foreclosures have been held up is because the paperwork is not in order. When that happens it can bring this whole piece of our financial system to a grinding halt. That’s huge.
Every recession that we’ve had it seems like the housing industry has been there. It’s been the leader in helping pull us out of a bad economy. It can’t do that right now because it’s weighted down with the effects of the consequences of the housing bubble and all that went on with it. I think for the general citizen you want to have laws that protect your rights to enjoy your property, and God forbid if you lose your job and eventually maybe lose your house that there’s the rule of law, there’s due process behind a foreclosure proceeding.
You may default on your payments, but nobody should get a free house. Banks that are purporting to be able to bring foreclosure proceedings -- they need to be able to prove they have the right to do that. If they can’t do that that’s a big problem. That leads to forcible taking of property when you can’t provide due process and you can’t prove you’re the entity that should be bringing these proceedings. Then you go into court and purport to say that you can, and then take the property.
I was on a phone call last year in the spring with a group of attorneys and it was amazing that we spent 45 minutes talking about racketeering statutes, the idea that some of these transactions could be the passing of stolen property. It was amazing. In America I would never think that I would be having this conversation.
JH: About big banks.
JT: Yeah. I grew up as a kid where our parents got our first home from a guy we knew who managed the bank. We had our own problems though. My dad lost his leg in a farming accident and spent a year in the hospital. My mom went blind. We could have lost our home, but we had a community supporting us and we had people who worked with us so that we could help pay our bills and keep our home. Now we’ve lost something. If "too big to fail" banks are going to continue to exist, if they’re not going to be broken up, then they have got to learn some basic things. They need to learn what kindergartners learn. When you go to school you learn how to write your name right, and you learn how to tell the truth.
JH: It shouldn’t be that hard. Let’s remember that the context here is the whole securitization process and they thought they had come up with a way to launder the risk out of high-risk loans by basically bundling them up into securities and then slicing those securities up further and selling them off to investors. When they did that they broke the chain between the lender and the borrower. That’s why you don’t have that kind of sense of connection between the banks as institutions and us as people.
JT: I think that’s exactly right. I think that is a big issue. Right now there’s a battle going on, and it’s going to be whether or not the securitization model continues. If it survives, how is it going to be put together in such a way that if they bundle loans and securitize them that it still pays to be boy scouts, and it doesn’t pay to be bandits? These transactions have got to be clear. If you don’t have that you really have big problems. So this office where nobody knows what I do as a public recorder has now become the center of the fact that all this paperwork isn’t in order. We’ve got to redevelop a system where we recover that. If we don’t it is a threat to democracy, it is a threat to the rule of law, and it is a threat to the foundational principles not only of property rights and property law, but commerce.