Whistleblower Attorney Lynn Szymoniak Exposes NY City and State Mortgage-document Fraud

New York State was sold years ago to banks and real estate moguls who have the money and motive to not only pay for the election of people who do their bidding, but pay for them to decide on their favor once they get elected. Take Attorney General Eric Schneiderman, for example (and before him, Eliot Spitzer and his dad).

Betsy Combier

NY mortgage fraud may top $100M

• By CATHERINE CURAN
• Last Updated: 10:44 PM, August 24, 2013
• Posted: 10:44 PM, August 24, 2013

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New York City and state have suffered massive mortgage-document fraud, with damages potentially exceeding $100 million.

That’s the explosive allegation by whistleblower Lynn Szymoniak and her legal team, whose lawsuit against two-dozen major banks and mortgage servicers alleging violations of the False Claims Act has just been unsealed.

“Almost every mortgage-backed security issued from 2004 to 2007 bought by New York state and City is tainted by fraudulent mortgage documents,” Szymoniak, a Florida-based attorney and fraud expert, told The Post.

Now that the lawsuit has been unsealed, Szymoniak and her lawyers are gunning to bring big banks and mortgage servicers — including Chase Home Finance, Ally Financial, CitiMortgage, Wells Fargo Home Mortgage and Bank of America Mortgage Securities — to trial in US District Court in South Carolina.

The suit alleges widespread creation and use of fraudulent mortgage documents, which reduced the value of mortgage-backed securities New York City and state bought.

Without admitting wrongdoing, Wells Fargo, Ally, Bank of America, Chase and Citi settled part of Szymoniak’s suit for $95 million in 2012, as part of a $25 billion national mortgage settlement.

Szymoniak noted that in 2006 alone, privately issued mortgages were packaged and sold into 1,126 investment trusts, most of which had an average total loan balance of more than $1 billion.

In the coming weeks, Szymoniak and her lawyers will try to determine exactly which mortgage-backed securities were purchased by New York City and state.

The case is complex, and, while it’s tough to estimate at this point how much financial harm New York state and City have suffered, Szymoniak’s attorney Reuben Guttman said damages could run into the hundreds of millions of dollars.

“The [$95 million] settlement is the tip of the iceberg,” said Guttman.

New York Attorney General Eric Schneiderman, Wells Fargo, Citi and Chase declined to comment. A Bank of America spokesman said, “We believe the remaining claims are without merit and will seek dismissal.”

An Ally spokeswoman said the bank “did not participate in any of the securitizations which are the subject of the plaintiff’s complaint.”

Whistle-Blower Lynn Szymoniak Beats the Banks

By Jef Feeley and David McLaughlin March 22, 2012

 Business Week

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Attorney Lynn Szymoniak had spent her career investigating insurance fraud when Deutsche Bank (DB) moved to foreclose on her Florida home in 2008. Almost four years later, she’s still fighting the foreclosure. Yet the fraud by numerous banks she uncovered after combing through mortgage documents has earned her $18 million.

Szymoniak, 63, is getting part of a $25 billion national settlement that state and federal officials reached in February with five banks, including Bank of America (BAC) and JPMorgan Chase (JPM), according to the Department of Justice. Deutsche Bank was not part of that settlement. “When they did this to her, they picked the wrong person at the wrong time in the wrong place,” says Richard Harpootlian, Szymoniak’s attorney. “They stuck their hand into the beehive.” John Gallagher, a spokesman for Deutsche Bank, declined to comment on Szymoniak’s foreclosure case.

The settlement with the five banks, which did not admit wrongdoing, resolves claims of abusive foreclosure practices and provides mortgage relief to borrowers. It pays $1.5 billion to those who lost their homes to foreclosure, and sets standards for how the banks service mortgages. It also provides $228 million to settle whistle-blower claims, according to papers filed in federal court in Washington. A group of six whistle-blowers will receive $46.5 million out of that amount, says Alisa Finelli, a spokeswoman for the Justice Department. Spokesmen for JPMorgan and Bank of America declined to comment on the whistle-blower cases resolved as part of the national foreclosure settlement.

VIDEO: Florida Has Highest Foreclosures by Inventory

 

Szymoniak stopped making mortgage payments on her Palm Beach Gardens (Fla.) home in 2008 after a battle with cancer wiped out her savings and she cut back on work to care for her sick mother, she says. In July of that year Deutsche Bank, as trustee for a mortgage securitization trust, sued to seize the house, which was once worth $1.3 million. Szymoniak says she was first alerted something might be wrong when Deutsche Bank said it acquired her mortgage note in October 2008, three months after suing her—meaning it might have begun proceedings without having the authority to foreclose.

Her suspicions aroused, “I began doing what I’ve done for years—go out and investigate,” she says. After examining her own and other documents in the Palm Beach County courthouse, she saw the same name appearing with different titles, and what she said were forged signatures. “It was pretty obvious to me that the paperwork was fraudulent,” she says. It took her “less than five days” of research to conclude that many lenders were using faulty documents as the basis for foreclosures.

Szymoniak approached law-enforcement officials with her suspicions that taxpayers may have been defrauded, she says, because banks submitted faulty documents to the U.S. Department of Housing and Urban Development seeking to collect on government-insured loans. Her discoveries also prompted her to hire Harpootlian, who had retained Szymoniak in the past as an expert witness in a lawsuit against insurer American International Group (AIG), to file her whistle-blower claims. While most whistle-blower cases are brought by company insiders who uncover wrongdoing within their own corporations or a competitor’s, a person doesn’t have to be an insider to file a false-claims case.

VIDEO: Property Speculators to Get Foreclosure Aid

 

The whistle-blower claims resolved in the national settlement include a case filed in Atlanta in 2006 in which banks are accused of defrauding military veterans and the U.S. government. The banks violated rules under a Department of Veterans Affairs program for refinancing mortgage loans by charging improper fees to veterans, according to the complaint, which also says the banks hid those fees and obtained government guarantees on the loans.

The two whistle-blowers, Victor Bibby and Brian Donnelly, will split $11.7 million out of the $45 million JPMorgan Chase agreed to pay to settle the veterans case, says Brandon Peak, a lawyer working on the case. Claims against other banks in the case are pending. The settlement underscores the benefits provided to taxpayers from whistle-blowers, Peak says: “The taxpayers actually receive this money back that they never would have received absent these whistle-blowers.”

Szymoniak says she’s unsure what she’ll do with the whistle-blower money. Deutsche Bank is proceeding with its foreclosure action against her home in a Florida court, she says, and she’s contesting it. Even if she used part of her award to pay off her mortgage, she says, “I would own a house with no clear title, so I still couldn’t sell it.”

VIDEO: California, N.Y. Among Mortgage Deal Holdouts

 

The bottom line: As part of a $25 billion settlement with five banks, a group of six whistle-blowers, including Lynn Szymoniak, will share $46.5 million.

Feeley is a reporter for Bloomberg News.

McLaughlin is a reporter for Bloomberg News.