Staying put: Laura Winfrey and her daughter, Justina Winfrey with binders of documents from their fight to keep their house on Quincy Street in Austin. (David Pierini/Staff Photographer)

The Property Fraud Game

Editor’s Note: First in a series investigating property fraud in Austin and West Side.

It happened to Chicago City Treasurer Stephanie Neely three years ago. 

In an interview that year on CAN TV 21, Neely detailed how someone waltzed into the office of the Cook County Recorder of Deeds, filed for a fraudulent affidavit for $40 and changed the name on the title of her home. 

Just like that, the place where she had lived for nearly 13 years was no longer hers.

“I didn’t even know I was a victim until a reporter called me to tell me there was an entity in Cook County that has stolen the deed title to 30 different homes in the Chicagoland area,” Neely said. 

The high-level victimization doesn’t end with Neely, who happens to be city official.  At an educational session for senior citizens last month in west suburban Maywood, Karen Yarbrough, the recorder of deeds, revealed that this also happened to her. 

When she became recorder last year, she decided to check the status of her own mortgage. She discovered that an entirely different mortgage worth $143,000 had been filed against her property.

“If I died, or my husband died, and tried to pass this property forward, here’s this $143,000 mortgage that would have to be dealt with,” Yarbrough said, noting that the claim was the result of a mistake. Yarbrough maintained that this kind of fraud happens all across the country.

“Normally, when this happens, you’d have to get an attorney to help you remove this fraudulent filing on your deed. Usually attorneys cost money — usually money you don’t have,” Yarbrough said. 

One of the reasons this kind of scam is so simple, Yarbrough said, is because county recorders aren’t authorized by law to verify the legal claims made on the many documents that they are tasked with recording. Technically, anybody can go the Recorder of Deeds office, file an affidavit and switch the name on the title of a home. Yarbrough said senior citizens are particularly vulnerable to this kind of scheme. 

“We all have that kid or that grandchild who lives in the basement,” Yarbrough said, recounting the case of a woman whose story appeared in the local news. 

“This woman was in her house and they actually changed the lock while she was looking out the window,” Yarbrough said. “The Chicago Police department came, but the guy didn’t go away. He showed police the title and they said, ‘Well, we guess he owns the property.’ But our office had some dealings with this lady. She knew to call us.” 

Since coming into office in January of last year, Yarbrough has addressed mortgage fraud by revamping the office’s online alert system. The Free Property Fraud Alert system notifies homeowners who register for the service of any “Quitclaim Deeds” filed against their properties, which are normally good indicators of fraud. 

To register, homeowners simply have to go to the website, click the alert hyperlink and enter their information. According to Yarbrough, the revamped alert system is her office’s signature initiative to date.

“We started pushing the system out there, because we thought it had a lot of value. Last year, we did just under 10,000 fraud alert signups and over 15,000 to date.”

Still, Yarbrough said her office has a long way to go to dealing with the problem. 

Yarbrough has embarked on a tour across the county to spread the word about the abuse. Her office has even hired a PR firm to increase the program’s visibility to the hundreds of thousands of homeowners statewide who still may not know about, or haven’t signed up for, the system.

The alert system, however, is just one aspect of the Recorder’s comprehensive approach to combating property theft. A former state representative, Yarbrough introduced legislation during her last year in the legislature that would increase the penalty of stealing someone else’s property, going from a misdemeanor to a felony.

Good, but not enough 

For Austin resident Justina Winfrey, this is good news, but not good enough. 

She says she’s the victim of a much grander scam perpetrated by some of the largest financial institutions in the country, made possible by the same gaping loophole exploited by the thieves who attempted to steal Stephanie Neely’s home. 

Since county recorders don’t typically check the validity of mortgage documentation, some of the biggest names in the mortgage-finance industry, including Fannie Mae, Freddie Mac and the Federal Home Loan Mortgage Corporation, were able to establish a company whose employees regularly sign mortgage documents fraudulently, Winfrey claims. They’re called robo-signers. 

Winfrey, a political scientist and strategic consultant, says she began immersing herself in the “ins and outs of mortgage fraud” when her family’s Austin home went into foreclosure in 2010. That immersion led her to discover the existence of a company called Mortgage Electronic Registrations Systems (MERS). 

According to a 2012 expose on the company in Harper’s Bazaar, MERS was created in 1995 “to manage a confidential electronic registry for the tracking of the sale of mortgage loans between lenders.” 

That means that mortgage lenders could now avoid the hassle of filing documentation with county clerks and paying the numerous fees attached to those ‘old-fashioned’ transactions. MERS was now listed in county recorder offices as the “mortgagee of record” and “it would effectively ‘own’ the loan where the public record was concerned, while the lenders traded it back and forth.” 

This way, it would be a lot easier for banks to chop the mortgages up and bunch them together into different investment pools to sale to investors on Wall Street. Those so-called “toxic” investments — riddled as they were with bad loans — would eventually cause the economic meltdown that began in 2007.

In Winfrey’s case, MERS is listed as the “nominee” for the Fieldstone Mortgage Company on a mortgage document dated 2010. The problem is that Fieldstone closed down in 2007 and CitiMortgage, Inc. — Fieldstone’s parent company — never recorded the original mortgage with the Recorder of Deeds. 

“In 2010, they had a law firm prepare a mortgage assignment that can’t be verified by a notary,” Winfrey said in an interview with Austin Weekly News. “When one mortgage company goes defunct, other mortgage companies are able to press a button and produce a signature from a notary seal from somebody who works for a company that has already closed down.”

In other words, the signatures were fraudulent because the person who signed the documents could not publicly attest to their authenticity. 

It was for this reason why in 2009 the Kansas Supreme Court ruled that MERS wasn’t entitled to foreclose on the mortgages it held. And a judge on the New York State Supreme court told Harper’s Bazaar that it “appears that every MERS mortgage is defective — a piece of crap.”

In the meantime, however, Winfrey’s mother’s house is still going through foreclosure, despite the fact that the company claiming to own the loan to her home probably can’t track down the original mortgage. In states such as Idaho, Massachusetts, Missouri and Nevada, such a fact has been enough to invalidate some foreclosure claims. In some states, homeowners have even had their mortgages swept away altogether, leaving their home debt-free. 

Winfrey said she wants to see Yarbrough follow the example of John O’Brien, the Register of Deeds for Southern Essex County in Massachusetts. 

O’Brien has filed for restitution on behalf of homeowners in his county who were affected by the actions of a company called DocX, which engaged in similar acts of signature fraud alleged against MERS. O’Brien is the first recorder, or register, of deeds in the country to seek restitution for the criminal actions of large banks and document preparers. He’s also pressed for a “forensic land” audit to examine the extent of the fraud that’s been committed in his county.

In the meantime, though, Winfrey has dedicated herself to educating others in the Austin community who may be going through the same thing. She hosted a community workshop on Aug. 14, where she met with about a half-dozen other aggrieved homeowners. 

One Austin homeowner who insisted on anonymity said she had been paying off the mortgage of her late mother’s home for nine years when she lost her job. After a while, her husband fell on hard times and their six checks a month was reduced to two. Though they fell a few months behind on their mortgage payment, it was still enough. But Chase Bank decided to foreclose despite the fact that the mortgage was fraudulently signed by the bank. 

The woman is the executor of her mother’s estate and a third-party signatory on the mortgage. She recalled being told by Chase for eight months that she could file for a “home modification loan.” That is until one day when she called the company and was told by an employee that she could not file — the company didn’t issue home modification loans to third parties, the employee told her.

“For eight months, no one was able to say this to me, but you now can say this?” she said. 

Winfrey noted that this scenario has played out with numerous homeowners on her block and beyond. 

For now, her family still resides in the home that she maintains is being unlawfully foreclosed on. At one point, she and her brother were even splitting the mortgage payments. Now, her responsibility has gone beyond simply making monthly payments. 

Winfrey wants more residents to become aware of possible solutions. 

“You have to take a bad situation and make it better,” she said. “God hasn’t said we could move yet and I guess it won’t be until I let the community know what’s going on.”

CONTACT: thevillagefreepress.org

To learn more

Property Fraud Alert info and signup: www.cookcountypropertyfraudalert.com