Judge Robert Drain has a message for Wells Fargo: “Forged” foreclosure documents don’t cut it in New York’s federal courts.
In a stunning 30-page decision on January 28, Drain, a federal bankruptcy judge in New York’s Southern District, blasted Wells Fargo, America’s largest mortgage servicer, for false documents it used in trying to prove its right to foreclose on Westchester County resident Cynthia Carrsow Franklin’s home.
Drain shredded Wells Fargo’s arguments regarding two crucial documents needed to prove ownership of a loan: an indorsement (another term for endorsement) on a note and an assignment of mortgage.
These documents have to be created properly within a certain time frame, or they won’t hold up in court.
The issue lies at the heart of the foreclosure crisis, and continues to haunt hardworking New Yorkers like Franklin, a speech pathologist for autistic children, to this day.
“… [T]he blank indorsement, upon which Wells Fargo is relying, was forged,” wrote Drain in a stinging rebuke to the bank. “Nevertheless it does show a general willingness and practice on Wells Fargo’s part to create documentary evidence, after-the-fact, when enforcing its claims, WHICH IS EXTRAORDINARY,” wrote Judge Drain with emphasis.
Drain went on to say that “it is conceivable that all of Wells Fargo’s newly created mortgage assignments and newly created indorsements were proper” but that the burden was on Wells to show that, and it didn’t.
A Wells Fargo spokesman said, “Wells Fargo’s processes ensure that all note endorsements are done legally and appropriately, and we strongly dispute the conclusions in this case,” adding, “we are troubled by the additional comments about our general practices that are unsupported by the evidence.”
The judge’s ruling delves deeply into the work of Herman John Kennerty, who was deposed for this case by Franklin’s attorney, Linda Tirelli.
Drain casts a harsh eye on Kennerty’s statements about his work as a manager heading up a “default documents” department for Wells Fargo at the time of Franklin’s foreclosure.
Kennerty admitted to signing between 50 and 150 original documents each day related to administration and enforcement of Wells’ defaulted loans, according to the ruling.
Drain added: “Moreover, Mr. Kennerty’s testimony does not stop at describing manufactured mortgage assignments. He also testified that his ‘assignment team’s’ duties were not limited to processing assignments, including, when determined necessary, creating them; in addition, the ‘assignment team’ included people tasked with endorsing notes.”
The Post first reported on Franklin’s case in March 2014, when Tirelli alleged in court papers that Wells Fargo set up detailed internal procedures in a 150-page Wells Fargo Foreclosure Attorney Procedures Manual (created Nov. 9, 2011, and updated Feb 24, 2012) to fabricate foreclosure papers on demand. Wells Fargo denied the allegations.
Franklin told The Post, “I feel relieved … I’m hoping this case will help other people.”
She added, “Reading this opinion … it feels very calculated. It wasn’t like I was lost in the shuffle somehow. And you know, if someone writes me a check and they forget to sign it, I can’t cash it. If in my job I turn in paperwork and I forgot to check something or to write in a code, it’s kicked out. I don’t get paid. That’s how it works with everybody else.”
Wells Fargo has about two weeks to file a notice of appeal. The megabank lost this round, but the judge also made it clear that Franklin’s debt remains.
Drain’s ruling followed another major loss for Wells Fargo in a residential foreclosure case last week — and another smackdown, this time from a Missouri state court judge. This in turn comes after Wells Fargo and three other big banks were hit with a $2.7 million penalty to settle allegations of unlawful foreclosures in Massachusetts.
On Jan. 26, Judge R. Brent Elliott of Missouri’s 43rd Judicial Circuit awarded $2.9 million in punitive damages to a Missouri couple who spent years in limbo after Wells wrongfully foreclosed on their home. Wells sold it to Freddie Mac on Aug. 15, 2008, even after agreeing to a reinstatement of the loan following a disputed debt.
Elliott also blasted Wells Fargo for “outrageous and reprehensible” decisions and “deceptive and intentional conduct” that “displayed a complete and total disregard for the rights of David and Crystal Holm.
“Defendant Wells Fargo operated from a position of superiority provided by its enormous wealth,” Brent wrote in a blistering nine-page decision. “Wells Fargo’s decision took advantage of an obviously financially vulnerable family,” the judge continued, noting that Wells Fargo showed no evidence of remorse for the harm caused.
“In fact, the Court recalls the lack of remorse and humanity illustrated by a Wells Fargo corporate representative who testified, ‘I’m not here as a human being. I’m here as a representative of Wells Fargo,’ ” the judge wrote.
The couple and their 12-year-old daughter got their home back, along with a total of $3.25 million in damages.
“We have modified more than 1 million mortgage loans and have forgiven $8.4 billion in principal since the beginning of 2009. There’s a lot more to this case than the decision reflects, and we have strong arguments to appeal the judgment and the unwarranted damages that were awarded,” a Wells Fargo spokesman said of the Missouri case.
8 He that by usury and unjust gain increaseth his substance, he shall gather it for him that will pity the poor.
10 The thief cometh not, but for to steal, and to kill, and to destroy: I am come that they might have life, and that they might have it more abundantly.