Cover image of "Chain of Title," a book about foreclosure fraud

Recent events have made us all aware that police officers sometimes act outside the law, not just in fiction but in reality. But what about their bosses and their bosses’ bosses? And the judges, attorneys general, and Justice Department officials who are supposed to oversee the administration of the law? How do we find out about it when they act outside the law — and what can we do in response?

David Dayen explores that question in Chain of Title, an expose of the criminal conduct that ran rampant during the fallout from what is so delicately referred to as the “housing bubble.” (The phrase sounds frivolous, doesn’t it?) With a focus on a handful of activists, most of them based in the state of Florida — among the states hardest hit by the foreclosure crisis — Dayen uncovers the truth about the role of law enforcement officials and the Wall Street banks in forcing an estimated six million people out of their homes. It’s a grim and deeply unsettling story.

Wall Street vs. Main Street

Dayen centers his tale on the experiences of three remarkable individuals: “a cancer nurse, a car salesman, and an insurance fraud specialist,” all foreclosure victims and all living in Florida. Theirs is the story of courage in the face of implacable resistance by powerful forces completely out of their control. However, several other key figures emerge in the story, including several other activists, a handful of county registrars determined to fulfill their legal responsibilities, and two low-level attorneys in the Economic Crimes Unit of the Florida State Attorney General’s office.

Ultimately, Chain of Title is the familiar tale of Main Street versus Wall Street — and, in the final analysis the result is familiar as well, with Wall Street emerging victorious. When cries for justice confront powerful economic interests, the outcome is almost always foreordained. Nonetheless, the three heroes in Chain of Title achieved something truly noteworthy: they exposed blatantly illegal activity by the big banks and collusion by federal, state, and local officials. Eventually, the media took notice. It’s due in substantial part to their efforts that we are aware today of the extent of the fraud in the foreclosure crisis.

Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud by David Dayen ★★★★★

What is “foreclosure fraud?”

During the peak years of the housing crisis, from 2007 through 2010, bankers and their allies in the criminal justice system and the media were fond of speaking about “foreclosure fraud” — referring to homeowners who defrauded the banks in order to “live free” in homes they didn’t own. Undoubtedly, there were a few people who took advantage of the circumstances to avoid paying their mortgages and committed such offenses. In fact, however, the pattern of fraud conducted by the banks was far more pervasive, far more blatant, and far more serious. Those truly responsible for “foreclosure fraud” were bankers, their business partners, and their allies in the criminal justice system.

As Dayen reveals, the overwhelming majority of housing foreclosures carried out after the bubble burst were conducted illegally — and those charged with holding the bankers and their business partners responsible almost invariably looked the other way. Why? Why have no bankers gone to prison for what we all know was their criminal behavior in setting off the Great Depression? In Chain of Title, by examining the ensuing mortgage crisis, Dayen explains why. The responsibility for this travesty starts at the top, with Larry Summers and others in the Obama White House, possibly including the President himself. However, Attorney General Eric Holder and his aides were directly responsible for shutting down the investigations into what Dayen terms “the greatest consumer fraud scandal in history.”

Why weren’t the bankers sent to prison?

In a just world, in my opinion, Eric Holder would have been sent to prison for obstruction of justice. However, the original sin in this tragedy was committed by bankers and their counterparts in the “non-bank financial institutions” such as Countrywide, the nation’s largest subprime mortgage lender. And it is sadly ironic that while I drafted this post the financial columnist Gretchen Morgenson revealed that the Justice Department has informed Angelo Mozilo, Countrywide’s former CEO, that he is no longer under investigation. More than any other single individual, Mozilo was responsible for the foreclosure crisis. To compound the pain of this announcement, the New York Times ran a long, front-page story explaining how huge private equity funds, which face far less regulatory scrutiny than the banks, have bought up enormous numbers of distressed mortgages and are “repeating the mistakes that banks committed throughout the housing crisis.”

The human face of foreclosure fraud

Since I was never personally affected by the mortgage crisis, I paid only cursory attention as the story unfolded in the last decade. I remember reading about the “robo-signing” of mortgage papers, thinking this meant that the banks were using machines to sign the documents necessary for them to foreclose on their debtors. I was astonished to read the truth in Chain of Title. The “robo-signing” was carried out by law firms operating as document mills, some of them offshore, churning out a flood of fraudulent papers.

Why? Because in their rush to rack up enormous profits the banks had failed to meet their legal obligations in documenting chain of title. Entry-level employees signed hundreds of documents every day, day after day, in what sometimes became a ludicrous parody of legal procedure. Chain of Title is full of jaw-dropping examples. Consider just this one to get the flavor of the problem:

American Home Mortgage Acceptance . . . does by these presents hereby grant, bargain, assign, transfer, convey, set over and deliver unto BOGUS ASSIGNEE FOR INTERVENING AS[SIGN]M[EN]TS, whose address is XXXXXXXXXXX, the following described mortgage.

Blatantly obvious evidence of fraud

This document was actually included verbatim in the papers submitted to justify tossing one family out of their home! And, in the course of just a few days, a handful of the activists identified in Chain of Title turned up 36 largely identical BOGUS ASSIGNEE examples in foreclosure proceedings around the country, including at least one in each of the eight states tested!

However, the injustice of foreclosure fraud went far, far beyond the use of bogus documents. As one Wall Street analyst and blogger explained,

. . . we end up with the wrong house being foreclosed upon, the wrong person being sued for a mortgage note, a bank without an interest in a mortgage note suing for foreclosure, and cases where more than one note holders [sic] are suing on the same property that is being foreclosed . . . The only way these errors could have occurred is if several people involved in the process committed criminal fraud. This is not a case of “Well, something slipped through the cracks.”

In many cases, “there were horror stories: banks breaking and entering into homes in the name of ‘property preservation,’ with one company even taking the ashes of a woman’s late husband; families making all their loan modification payments and still getting foreclosed; a woman who paid off her house and then got a default notice; sheriff’s deputies conducting an eviction and finding a dead body.” Dayen also cites one case in which a couple paid off their mortgage early, and another whose mortage payment was 14 cents short: both were foreclosed!

Why did all this happen?

Dayen explains in great detail the origins of the housing crisis and describes its unfolding, with tragic consequences for millions of Americans. But the essential facts are clear: Beginning in 1980 (before Ronald Reagan moved into the White House), Congress legislated “reforms” in the laws governing home mortgages in the interest of saving the troubled savings and loan industry, “effectively legalizing consumer abuse to aid a class of financial institutions.”

Those changes in the law, greatly magnified by the actions of the Clinton Administration to weaken regulations over Wall Street even further, lay the groundwork for the banks to indulge in financial hocus-pocus and effectively build a massive Ponzi scheme: the securitization, derivatives, and subprime mortgage loans that precipitated the Great Recession and upended the world economy.

Millions forced out of their homes

When the whole system began crashing down, millions of Americans were forced out of their homes because the banks were scrambling to protect their profits; they cut corners mercilessly, ignoring the law, good business practice, and simple ethics. Judges and other officials at the state and local level failed to clamp down on them because they were beholden to the banks or in thrall to right-wing ideology, because “finding the fraud got people fired,” because sometimes there were financial incentives to overlook the problems, or simply because they were lazy.

And the state attorneys general and senior officials in the Department of Justice refused to stop the unfolding disaster, much less send senior bankers to prison, partly because they themselves had come from the financial industry or from law firms serving the banks, and partly because the stakes were so high. They feared that the American economy would go into a tailspin and possibly never recover if the big banks were brought to heel. That, at least, was the rationalization that led the Obama White House to turn a blind eye to all the illegal activity.

About the author

David Dayen is a contributing writer for and a weekly columnist for The New Republic and The Fiscal Times. Chain of Title is his first book.

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