, Salem, MA

January 21, 2013

Southern register seeks $1.3M restitution

By Douglas Moser
Staff Writer

---- — An Essex County register of deeds has filed for $1.3 million in restitution to clean up thousands of potentially invalid property documents affecting more than 9,500 pieces of property following the guilty plea of the owner of a reputed “robosigner” company.

John L. O’Brien, register of deeds for the Southern District of Essex County, said the filings of DocX, a Georgia-based company that created and signed mortgage and lien transfer documents for large banks and mortgage lenders nationwide, are all in doubt after DocX founder and chief executive Lorraine Brown pleaded guilty in November to federal fraud charges in Florida.

“DocX was used by big banks to create fraudulent documents in mortgages. That’s what it did,” said Kevin Harvey, the first assistant registrar in the southern district. “Anything filed by DocX is tainted by anything that Lorraine Brown said in her plea.”

Paul Iannuccillo, the newly-elected register of deeds for the Northern District of Essex County, said he does not think he could file something similar because his office has not done the forensic investigations of documents and could not be specific enough about the problem.

“In general I support what he’s doing,” said Iannuccillo. “I think it’s a great idea.”

Harvey said the southern district office, which covers all of Essex County except for Lawrence, Andover, Methuen and North Andover, so far has identified 10,567 documents filed by DocX between 1998 to 2011, all of which the registry considers suspect.

Additionally, a 2011 forensic audit of all documents filed in 2010 “indicates that such corruption must necessarily extend well beyond the 10,567 admittedly or presumably false or fraudulent DocX/LPS documents that are at present recorded in the Southern Essex District,” O’Brien wrote in the federal court filing.

O’Brien said in the filing that a fraudulent document in a chain of title puts a cloud over every subsequent valid property document, and could complicate homeowners trying to sell their properties, refinance their mortgage or extract equity from their properties. Many of the documents are mortgage assignments, which declares the sale of a mortgage from one company to another.

“Those documents need to be replaced by whoever is the bank that used DocX to create a document,” Harvey said. “Those documents need to be repaired and the correct document needs to be put in the chain of title.”

The $1.3 million restitution from DocX, which includes fees and the cost of the 2011 audit of documents, would be used to ensure banks create and file valid documents to replace the DocX documents, Harvey said.

Brown filed a guilty plea in federal court in Jacksonville in November to a charge of conspiracy to commit mail and wire fraud.

The deal allows the court to order Brown to pay restitution to any fraud victims. O’Brien, in his filing, cited that part of the plea agreement as the basis for his claim to restitution for Essex County.

Brown has not yet been sentenced.

Attorney General Martha Coakley in December 2011 filed suit against five major banks for, among other things, “pervasive use of fraudulent documentation in the foreclosure process,” according to a press release from her office at the time. Coakley’s office participated in a $25 billion state-federal settlement against those banks for claims that included fraudulent documents. The agreement earmarked $318 million for Massachusetts borrowers for refinancing, loan modifications and direct payments.

Coakley’s office declined to comment on O’Brien’s filing or on whether the attorney general planned to file a similar claim.

Attorneys general around the country sued banks after reports of large lenders using so-called robosigners to sign certifications of certain mortgage-related documents, such as those that show a given bank owns a mortgage. However, many banks could not find the documents proving ownership of mortgages, despite the mortgage assignments they, or companies like DocX, were signing and filing.

Many of those filings are needed in the foreclosure process, and the validity of the foreclosures was cast in doubt after numerous news reports in 2010. Banks slowed down the foreclosure process to review their foreclosure processes.