What is Robo-Signing?
In the mortgage industry, robo-signing is the practice of an employee signing thousands of documents and affidavits without verifying the information contained therein. Some reports have revealed that one bank official signed off on almost 10,000 documents in one month. The practice calls into question the validity of thousands of mortgage assignments and foreclosures across the country.
Banks have been under investigation since 2010 for their part in the robo-signing scandal which resulted in many homeowners losing their homes without merit. After the scandal came to light, the banks said they would no longer engage in this practice. However, as recently as July 2011, it was discovered that mortgage robo-signing was still being practiced.
When the practice recently came to light, four major banks; JP Morgan Chase, Ally Financial/GMAC, Bank of America and Wells Fargo all called to a halt of foreclosure actions in 23 states. In the days following their announcements, Bank of America ceased foreclosures in all 50 states. A coalition of 40 attorneys general plan on launching a probe into mortgage servicing practices and may hold them accountable where there were violations of state foreclosure laws.
A robo-signer is a person in a legal document processing assembly line whose only task is to sign previously-prepared documents affecting title to real property in a robotic-like fashion without reading the documents or verifying the facts contained therein by reviewing the primary source of evidence. The robo-signer's mission is to expedite the documents' recordation in the public land records and/or in court proceedings. Additionally, robo-signers regularly fail to establish or simply do not have the authority to execute these documents on behalf of the legal title holder or principal on whose behalf they purport to act.
A surrogate signer is a person who signs a legal document on behalf of and in the name of another without reading it or understanding the document's contents. Surrogate signers are not authorized to execute these documents on behalf of the legal title holder or principal on whose behalf they purport to act.
ROBO-SIGNING IS FORGERY
Forgery is the creation of a false written document or alteration of a genuine one, with the intent to defraud. Forgery consists of filling in blanks on a document containing a genuine signature, or materially altering or erasing an existing instrument. An underlying intent to defraud, based on knowledge of the false nature of the instrument, must accompany the act.
FORGERY IS A FELONY
"This is the first time any grand jury in the country has indicted a corporation or a high-level executive at a corporation for 'robo-signing,'" Missouri Attorney-General Chris Koster told The Huffington Post. "The grand jury is alleging that the documents have false signatures on them, that the notarizations are fraudulent and that it was all done with intent to deceive. If that's true, it makes the [foreclosure] documents forgeries."
Elements of Forgery, in General
Forgery is the false making or material alteration of a writing, where the writing has the apparent ability to defraud and is of apparent legal efficacy with the intent to defraud. The elements of forgery are:
The person must have taken paper and ink and created a false document from scratch. Forgery is limited to documents. "Writing" includes anything handwritten, typewritten, computer-generated, printed, or engraved.
The person must have taken a genuine document and changed it in some significant way. It is intended to cover situations involving false signatures or improperly filling blanks on a form.
Ability to Defraud
The document or writing has to look genuine enough to qualify as having the apparent ability to fool most people.
The document or writing has to have some legal significance affecting another person's right to something. A writing of social significance (only) cannot be the subject of forgery.
Intent to Defraud
The specific state of mind for forgery does not require intent to steal, only intent to fool people. The person must have intended that other people regard something false as genuine. A forgery is complete upon having created such a document with this requisite intent.
Robo-Signing & Forgery
A signer in an assignment of mortgage or deed of trust may be a well-known or even an admitted robo-signer, but in forgery, there must be that certain act which pertains to the document at hand. It is not sufficient that the signer has been reported as a robo-signer. It must be proven that this particular assignment, to the exclusion of all else, bears evidence that the signature of the person in question has been forged or robo-signed or signed by a surrogate signer.
The most readily-available evidence then, would be proof that the signature on the examined document differs from the signatures of the same person on other documents. Any of these other documents may even show that this person also signed under different capacities or various types of representation with various other entities.
When two signatures of the same person differ from each other, there can hardly be an assumption that both are genuine. Indeed, the assumption would be that one or both of these signatures do not belong to the person who purports or is made to purport to have signed them.
Identifying differences between two signatures for the purpose of determining whether or not these have been signed by two different persons requires knowledge of certain techniques. Most important of all is that it must be known before the actual verification which of the two signatures is genuine. The bottom-line is to prove that the examined signature is not the signature of the person signing based on his/her genuine signature. This procedure may require one or more repetitions using more than one specimen.
Elements of Forgery in Robo-Signing
After establishing proof that the signature on the examined document does not belong to the person who purports or is made to purport to have signed it, the next and most important step is to prove that all the elements of forgery are present.
There should be no question about paper and ink being taken in order to create a false document from scratch. The presence of the document, notarized and recorded, is itself the proof. Usually, one person would prepare the document and another, the authorized signatory, would sign it. Several individuals may have participated in the creation of the false document, but all of them would be under the employ of one person, and that is the entity which executed the document. It could be MERS, or it could be the originating lender itself or the trust which securitized the loan, or their agents, trustees, or attorneys-in-fact.
The notarizing official is intended to be the party who gives credence to the document and is thus supposed to be independent of the executor and has no interest in the execution of the document. Any failure of the notarizing official to discharge his/her duties properly would simply be an omission, i.e., failure to properly identify the signer before notarizing the document, or a commission, i.e., wilful neglect of duty or purposely acting as accessory in order to create the false document.
The most significant part of a document is its signature. It is the element that gives value to the document. Without the signature, the document would be just like any other piece of paper; it may provide information, but it will not grant authority, transfer rights or ownership, or forge contracts and create obligations.
It thus follows that when the signature of a person is placed above the name of another who purports or is made to purport to be the actual or official signatory in order to give value to the document, i.e., to make it valid, legal and enforceable, then a material alteration in the context of forgery has taken place.
ABILITY TO DEFRAUD
There is also no question about the ability to defraud on the part of the entity which executed the document. As we have seen, robo-signing is committed mostly by lending institutions and securitization trusts represented by their various agents, including MERS.
In some instances, the document with the forged signature would be co-signed by another person of more or less the same rank and/or by one or two more persons acting as witness/es. In order to comply with standard required, this document would be notarized and recorded in the county where the property belongs. Any document of this kind, would, in all probability, have the ability to lead the ordinary reader to believe that everything in it is true and genuine.
The documents covered by robo-signing are mostly assignments of security instruments and to a lesser extent endorsements of promissory notes (I say this because I have seen more assignments than endorsements). Robo-signing also applies to substitutions of trustees and even notices of default and other acts by trustees (of the security instruments in non-judicial states).
Robo-signed documents usually arise out of the need to show proof that the security instrument has been transferred to, for example, a securitization trust, and/or becomes necessary when it is time to foreclose on the mortgaged property. In judicial foreclosure, the transferee-plaintiff would then claim, among others, that it is the holder and/or owner of the mortgage and would cite the particular assignment as its cause. In non-judicial states, the trustee would simply state that it is the duly appointed trustee of the principal which would then be cited in the document as the party to be contacted in order to avoid the foreclosure.
In other words, the document thus transfers or confers legal rights upon the assignee or appointee. In the case of a security instrument, it confers the rights of the mortgagee or beneficiary or grantee from the assignor to the assignee.
INTENT TO DEFRAUD
It is forgery when the public is made to believe, for example, that the affiant or claimant is the owner of a security instrument through a valid assignment. Being the holder and/or owner of the instrument is different from being the transferee of that instrument by way of a valid assignment. Indeed, the claimant may be the holder of the mortgage but the intent to defraud lies with the transfer document, the assignment.
We have also seen several instances wherein the security instruments were assigned but there were no corresponding or underlying endorsements of the notes to the respective assignees. A secured creditor would not be willing to assign the security instrument to another party if it is not willing to endorse the note in the first place. It is forgery when an assignment is fabricated (and recorded) in order to show or support the claim that the claimant owns or holds the security instrument even if it is not the holder of the note by way of a valid endorsement at the time of the assignment.
The Robo-Signing Examination
A robo-signer examination is performed at the request of a client. The client provides the examiner a copy of the document to be examined, which has been notarized, and, preferably, would have recorded in the county that has jurisdiction over the property.
The examination is based on the documents presented. It covers the signatures on endorsements and assignments of mortgage, deeds of trust or security deeds (more often), and substitutions of trustees, notices of default and notices of sale (less often).
The procedures of verification consist of three steps.
Robo-Signing Information. The examiner searches for reliable information on the signor's involvement in robo-signing. This may come in the form of news reports, articles, or even blogs including the inquiries and replies on their comment threads. For this purpose, this examiner considers the Southern Essex County (Massachusetts) Register of Deeds Robo-Signers List and the Report on the Comprehensive Forensic Examination of the Real Property Records of Osceola County, Florida as the most reliable sources of information.
The nature of the signor's involvement is briefly described, the source of information is cited and its link is provided. Up to three different sources of information may be cited in the report.
Signature Verification. The examiner compares the signatures on the document with available specimens. This procedure applies to the person/s signing the document on behalf of the assignor, the witness/es and the notarizing official. To serve as specimens are other documents bearing the signatures of the persons in question as are available on-line and from the examiner's own compilation (listed in the column at right).
The comparison is presented by the use of screenshots of the signature in question vis-à-vis the specimens. A brief description of each screenshot is provided. Up to two specimens may be used for comparison.
The purpose of the robo-signing verfication section is to establish prima facie evidence that the signature/s or the signor/s, the witness/es and/or the notarizing official have been forged or robo-signed or signed by surrogate signer/s.
Verbiage of the Assignment
This section applies to assignments of security instruments and covers the review of the language of the assignment document, more particularly on the subject of the assignment, or what is covered by it. As one can distinguish from the title of the document alone, the subject of the assignment is the mortgage or deed of trust or security deed.
A closer scrutiny of the document, however, might uncover that the assignment also includes or purports to include the note secured by the security instrument being assigned. A note is a negotiable instrument which can only be transferred by endorsement, and the form of an endorsement is prescribed by law. Thus, an assignment which includes or purports to include the note being secured is not correct and not true whether or not the note has actually been endorsed.
An assignment that is so worded has a more grievous implication on MERS because MERS would execute an assignment as nominee for the lender. As such, any authority MERS would have could only pertain to the security instrument. An assignment that is so worded would mean that MERS had already acquired the authority to endorse the note, which, of course, is not usually the intention of the originating lender.
In a typical notarial oath in an assignment of a security instrument, the notary public certifies under the laws of perjury of, or simply under the laws of, the state under which s/he is commissioned to act as notary public, that the signor personally appeared before him/her and who is personally known to him/her or proved to him/her on the basis of satisfactory evidence to be the person whose name is subscribed to in the instrument, and acknowledged to him/her that the signor executed the instrument in the signor's capacity, and that by the signor's signature on the document, the assignor, upon whose behalf the signor acted, executed the assignment.
This procedure covers the notarial oath as it applies to the truth that person who signed the document is really the person s/he purports to be, that s/he has the capacity under his/her purported designation with the assignor, that the assignor has the authority to execute the assignment acting in its own behalf or as agent for the mortgagee or owner of the security interest, that by the signor's signature, his/her act is the act of the assignor and its principal, as applicable, and that, as applicable, it is the intention of the assignor and the assignee to bind themselves to the language of the assignment and make it known to the public (an assignment being a public document), that the assignment includes and purports to include the note secured by the security instrument being assigned.
The main purpose of this section is thus to establish prima facie evidence that the person who signed the oath as a notary public is not the same person s/he purports to be and therefore was not the person who was commissioned to act as such notary public.
On the other hand, there may be no question about the notary public who signed the oath, but if the signature/s of signor/s and/or the witness/es have been proven to have been forged or robo-signed or signed by surrogate signer/s and/or if the assignment did not really or legally cover the note being secured, then the notary public may be liable for violating the rules for notaries public in his/her own state.
The report is divided into two main parts; namely, the findings and the examiner's comments. The first part is divided into sections as there are documents examined for each borrower. Each section is divided into sub-sections as there are signatories who are to be cited in the report, as there is an adverse finding from the review of the verbiage of the assignment, and as there might be prima facie evidence that the signature of the notarizing official has been forged or robo-signed or signed by a surrogate signer, or that the notarizing official may have violated the rules for notaries public. The signatories to be considered are mainly the person who signed the document on behalf of the assignor and the notarizing official. The witnesses may or may not be included, depending on the instructions of the borrower.
The sub-section bears the name of the cited person as its title. It will contain one or more of the following:
1. a statement that the person cited has been allegedly involved in the
robo-signing of loan and mortgage documents. The links to up to
three sources of this information are provided;
2. a report that this person's signature on the document differs with
his/her signatures on other documents that s/he signed on different
dates. Screenshots of the signature in question and the other
signatures serving as specimens (up to two [or more as the client may
prefer]) are provided as well as information on the sources of the
3. a report that this person has also executed documents similar to the
one examined while representing another entity in any capacity (for
one or more instances).
The verbiage of the assignment will also constitute one sub-section in the report and will contain the following:
4. a statement that the assignment covers the note secured by the
security instrument being assigned, which is of course not true and
not correct, and therefore that the document contains a falsity which
was otherwise certified by the notary public as true and correct.
The notarial oath will constitute the last sub-section and will contain the following:
5. a statement that the notary public certified the oath even with the
knowledge that or without verifying that:
5.1. the person who signed the document may not be the real person
s/he purported to be;
5.2. the person who signed the document may not be the real person
who was authorized by the signor to act on its own behalf;
5.3. the assignor, purporting to act on behalf of its principal, may not
have been duly authorized to act or was acting beyond its
5.4. a note is a negotiable instrument can only be transferred by
endorsement and the form of an endorsement is prescribed by
law. Thus, a statement that the assignment covers the note
being secured is not true and not correct.
6. if any or all of paragraphs 1, 2 and 3 are present, a statement that
the notarial oath may not have been signed by the person who was
commissioned to act as notary public.
This report may be prepared exclusively on the subject of robo-signing or may be made part of a report on the Chain of Title Examination or Securitization Audit. A sample report can be viewed through the link provided at the bottom of this page.
The findings in the examination are factual although it is provided for informational purposes only and is not to be construed as legal advice. Users are strongly advised to consult a competent legal professional in connection with the contents of the report and its proper use.