The Wells Fargo “Mortgage Foreclosure Attorney Procedure Manual” continues to make news.  Now the judge in the case that brought all this to light is saying the following:

At the hearing, attorney David Dunn said the bank’s note endorsement process “relates to the endorsement by Wells Fargo of notes that are payable to Wells Fargo.”

“Well, I don’t know that for sure,” said Judge Drain, who later added: “I don’t know. If … there is an endorsement team that can retroactively put in endorsements.”

Judge Drain also ordered the bank to provide documents relating to the involvement of a note endorsement team, and any agents or employees endorsing notes by Wells Fargo with respect to Carssow-Franklin’s note.

“How this was actually processed is front and center in this case,” said Judge Drain. “I’d rather have the issue cleared up, and, frankly, I think Wells Fargo probably would too.”

I’d like to believe (but don’t!) that Judge Drain read my article “Bank of America’s Magic Wand,” which, while it’s not about Wells Fargo, it does call for exactly what Drain is trying to get at here, namely–go after the flunkies who are supposedly putting these endorsement stamps on the notes, supposedly before the notes are “securitized.”  By now it’s pretty clear that the endorsers named on any of these notes are not actually the ones wielding the stamps, if in fact the stamps are even actually wielded.

Judge Drain seems to be making a very important distinction here: he wants to know how the documents were actually processed rather than how they should have been processed.  In the chasm between those two processes lies the potential for the undoing not just of Wells Fargo, but of “securitization.”

Indeed, for an endorsement to be effective and legally sufficient, it needs to have been done prior to “securitization,” because securitization cannot exist without negotiation–that is, the endorsement and transfer of a promissory note.  Both endorsement and transfer–not just one or the other–are what defines negotiation, and negotiation is the crux, the lifeblood of “securitization.”  And “securitization” is that process that purportedly creates what are known as “mortgage-backed” securities (MBS) that have caused just a little bit of a fuss.  Note: For more on why endorsements of promissory notes are so important, see this.  And this.

But we know that, in many if not most cases, these all-important endorsements were either not done at all or were done after “securitization” had supposedly taken place.  Which, as pointed out above, is impossible.  No endorsement=no negotiation and no negotiation=no securitization.  No securitization means that some trust or pool has no right to take someone’s house (that’s what it should mean, but–surprise!–courts don’t rule that way).

The flunkies and the temps need to be deposed, post-haste!

But again, Drain is right to try to get to the flunkies, one of which–who worked with Wells Fargo–blew the whistle to Naked Capitalism back in 2013.  The flunkies–temps, mainly–are the ones who would have the requisite personal knowledge of what actually went on with the alleged endorsements and the document reviews.  A sample of what the whistleblower revealed:

The whistleblower worked with a team of 50-60 temps, one of the two shifts involved in checking documents before and after the “corrections” were made. The temps came via agencies, were required to have a college degree and pass a security clearance, and were paid roughly $13.00 to $14.50 an hour for eight hours (seven hours of work + breaks). The whistleblower said very few people (under 20%) had prior experience with mortgage documentation. Since Wells has a long-standing practice of promoting temps into permanent positions, the workers had a strong incentive to perform well. Our source worked for the bank for nine months.

His unit would review mortgage documents of borrowers who were described as “in foreclosure” which he understood in practice meant they were delinquent but the foreclosure has not not been initiated. When our source arrived (spring 2012), they were in the process of doubling the work capacity of this effort. Wells Fargo beefed up in the wake of the state attorney general/Federal mortgage settlement of early 2012, evidently seeing it as a green light for more aggressive and systematic document fixing.

This team had two tasks. The first was to review documents that were delivered periodically (often daily) to make sure they were in order. The part we’ll focus on is that they would check the notes to see if the endorsements matched up against what the bank wanted them to look like. (Regular readers of this blog will recall that mortgage notes are endorsed to convey ownership, and in foreclosures, attorneys often challenge the foreclosure if the borrower note does not show a complete and unbroken chain of endorsements to the party initiating the foreclosure). The whistleblower estimated that 99.5% of the notes that he reviewed that had been securitized failed the bank’s tests, and roughly 10% to 15% of the bank owned mortgages were tagged as “fails”.

In my view, Drain should hear not from Wells Fargo mouthpieces or any robo-stampers/robo-endorsers (i.e., the people’s names who appear on the alleged endorsements), but from these temps.  These are the people that have personal knowledge and can tell what really happened.  We already know what really happened, as pointed out above: 99.5% of the “securitized” notes failed the bank’s own tests!

Related stories at LRM:

CONSPIRACY FACT, NOT THEORY: WELLS FARGO’S MANUAL

“IF YOU DON’T HAVE THE DOCUMENTS, PERHAPS YOU JUST DON’T HAVE THE RIGHT TO FORECLOSE.”

IMPORTANT NOTE/DISCLAIMER:  The above article is not legal advice and was not written by an attorney.  It is merely a collection of common-sense, rational observations written by a sane, rational layperson with common sense.  It is recommended that you consult with an attorney for any and all legal advice and/or action.