$12 Trillion Fraud, Foreclosure Defense

The fallout from an alleged $12 trillion attorney fraud continues. Plantation attorney David Stern recently announced that his firm was closing. The Florida Attorney General is investigating Stern for alleged fabricated foreclosure documents, slipshod paperwork and questionable fees.

Banks got expensive new attorneys to keep foreclosing 100,000 Florida homes (one in five). At $200,000 per mortgage, that is $20 billion, not $12 trillion. You probably heard the big news about this, when banks froze foreclosures for a month. However, no attorney change is likely to undo the foreclosure defense damage. How big is $12 trillion?

At current rates, it is more than the U.S. government will spend in three years or collect in taxes in five years. The alleged $12 trillion fraud relates to DJSP Enterprises. Stern got $145 million when it went public. Shares went from $10 to less than five cents. Now it will delist from NASDAQ. DJSP had 1,200 employees. It now has 50, so it says it “may cease operations.” This seems certain, since it already stopped paying rent and has former employees suing for improper layoff notices.

Why do I feel Stern committed a $12 trillion fraud? A major (Fort Lauderdale) Sun Sentinel story, Florida Mortgage Meltdown, ignored this. However, many articles let this CPA compute the $12.4 million fraud in November. Here is quick summary.

Stern created a national electronic registry for mortgages and related transfers. He registered 62 million mortgages from major banks. With a $200,000 average, that is $12.4 TRILLION! Stern then used changes to this registry, instead of recording each mortgage transfer in local records. Many banks pledged mortgages to secure bonds and other securities. This too involved registry changes, not local recorded transfers, even though these securities could trade without registration. 

Twenty-four states and localities sued, class action, over not getting mortgage transfer taxes on mortgage electronic or bearer bond transfers. Five state courts threw out mortgage foreclosures entirely when the registry prevented banks from showing appropriate transfer documents. In others cases, retired Florida judges had no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, the most complex Ponzi scheme in human history.

Stern seems to have committed one small fraud by not, as an attorney, collecting and paying appropriate mortgage transfer tax. This is no surprise, as the main robo-signing secretary swore she did not understand what she was signing or when she did it. The major fraud involves the electronic registry. Foreclosure expert Stern almost surely had to realize that its transfers violated mortgage documentation laws, especially after early foreclosure defense cases. Instead of dropping the registry or fixing problems, Stern allegedly supervised a system of fabricated and back dated documents, slipshod paperwork, unpaid transfer taxes and questionable fees.

All courts seem to be rejecting Stern-registered mortgage foreclosures efforts, if foreclosure defense attorneys raise appropriate defenses. My $12 trillion fraud estimate may be high, since few use competent foreclosure defense attorneys. Google has 15 million links to them. Foreclosure defense attorneys may charge only around $1,500. One prominent foreclosure defense attorney charges $1 a day (ContactUs@MyInjury.com). This is a good investment for negotiating mortgage modifications and liability-free short sales. Foreclosure defense attorneys also may let Florida homeowners live payment free (principle, interest, taxes and insurance) for more than four years. That can mean a $48,000+ saved on $1,500 paid to a foreclosure defense attorney. This may apply even for mortgages not in Florida or the national Stern registry.

How does the $12 trillion potential Stern fraud affect current bank loan loss and additional capital estimates? Estimates of U.S. bank loan losses have been increasing fast. They are now around $1.8 trillion. That may mean $1+ trillion in new bank capital. Much of this may have to come from taxpayers. However, knowledge of the effectiveness of a good foreclosure defense attorney is increasing rapidly. Add the alleged $12 trillion fraud and foreclosure losses may increase further.

On a personal note, I knew the electronic registry would be trouble when my grandson said a young friend was Stern’s former lead computer person. The friend also needed a good foreclosure defense attorney. In addition, Stern’s attorney is the prominent Jeffrey Tew. He practices with the equally prominent Thomas Tew. Thomas represented the Alderdice brothers, owners of International Gold Bullion Exchange. I was an unpaid lead witness in the case against them. I estimated their Ponzi scheme lost $80 to $100 million, when initial estimates were about $20 million. Thomas said I was trying to be judge, jury and executioner. However, there was soon a guilty plea and $200 million in losses. The money left only paid attorneys and accountants (not me).

 

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