Mortgage Lenders Seeking Court Permission To Destroy 22,100 Boxes Of Original Loan Documents

Tyler Durden's picture

The solution to the ongoing fraudclosure fiasco is so simply and yet so brilliant (in a way that benefits the banks naturally) is so brilliant, that it has to date evaded most... but not all. The solution: just shred it all. That is what insolvent mortgage lenders Mortgage Lenders Network USA and American Home Mortgage are pushing hard to get permission from their respectively bankruptcy judges in their chapter 7 liquidation cases. Says Reuters: "Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost." With servicer banks increasingly unable and unwilling to provide the original lender docs (since they don't have access to them) to parties curious in seeing if there is a legal case to continue paying their mortgage, what better solution than to have the banks retort that the original document was sadly destroyed in a court-appointed shredding. In that way all the fraud canaries are killed with one stone, and the party responsible is none other than some bankruptcy judge who had given the go ahead for the wholesale destruction. And since we are not talking peanuts, in the case of MLN it comes to 18,000 boxes of records, while in the AHOM case it is just over 4,000 boxes, we wonder just how many other originators have gotten a comparable idea from the banks, and are currently busy shredding every last detail of an original mortgage note. Good luck trying to convince anyone that the bank is not in possession of a mortgage that was "purposefully" destroyed as part of a company's liquidation proceedings. Soon to follow: the burning of all books and the banning of all websites that dare to claim this is nothing but pure, grade-A criminal destruction of evidence.

More from Reuters on this stunning development:

In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts."

The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.

In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island.

AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007. The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive.

The reason cited for this scandalous request: warehousing costs:

Luria stated that destruction is necessary to eliminate $16,000 per
month in storage costs as he disposes of the last assets of the bankrupt

This is akin to the Fed terminated the reporting of the M3 due to the exorbitant costs associated with keeping track of a few data series...

And, not surprisingly, we find that some have already been going through with document shreeding for a long time already:

In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files.

Gee, we wonder why the banks opted out of picking up files confirming they are not the proper servicer on thousands of mortgages.

And in conclusion:

In court documents, Sass stated that most of the records AHM still has in storage relate to mortgages issued more than eight years ago. He also said that employees had searched the files and pulled out all vital original records, such as promissory notes, and had handed them over to the appropriate mortgage servicers, and that most of the documents had been electronically imaged and retained in a database.

But people involved in winding down AHM's affairs say that neither the contents of the boxes or the database have been audited, and that it's possible the boxes still contain crucial documents such a promissory notes. Investors must have the original promissory notes, not copies, to be able to foreclose.

The take home message: should the bankruptcy court side with the liquidation trustees, Neil Luria and Steven Sass, who without a doubt have had extended discussions with the current batch of TBTFs which will be hung out to dry if the fraudclosure issue is further prosecuted, then it is safe to say that any claim that America has a fair and impartial judicial system can follow the last hopes of Emanuel's mayoral campaign dream right out of the window.


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Confused's picture

$16,000 a month? hahahahahahahahhhahahahahahahahahahahahaha

Sudden Debt's picture

I've got a few garage boxes where they can store it FOR ONLY $15.999,99


Just imagine some moron would have bought a document scanner and put it all on 1 DVD!


Confused's picture

Thanks exactly what my first thought was. 

Slow learner's picture

How much dose the apartment above you rent for?

SheepDog-One's picture

Still theyre using 1970's style 'banker boxes'? LMAO no wonder theyre all bankrupt! Hell even my mom has everything on disk!

TeMpTeK's picture


Mortgage note instruments must be originals only.. Copies in any form wont pass muster..

Cognitive Dissonance's picture

$16,000 a month? hahahahahahahahhhahahahahahahahahahahahaha

OK Zero Hedge readers. Let's pass the hat and save those poor files from destruction. Maybe we can get WB7 to come up with some artwork to commemorate the occasion.

Save the files. Give till it hurts......the TBTF.

Confused's picture

Sorry, I know that was immature. Its just amazingly painful to hear some of these things. I know storage costs can be high.....but really. To me (not that I know better) it just seems a bit high.


But I was also laughing because that excuse is just weak. 

DonnieD's picture

We've already paid $160 million defending Fannie and Freddie. And now they have to destroy evidence to save $15,000 a month. Fuck you, legal system. 

Common_Cents22's picture

No shit, that lawyer should have been bitch slapped for wasting the courts time with that request.

Common_Cents22's picture

No shit, that lawyer should have been bitch slapped for wasting the courts time with that request.

Boxed Merlot's picture

The reason cited for this scandalous request: warehousing costs:...


If the US taxpayer can pay to keep likes of Chuck Manson eating, breathing and equipped with a cell phone, surely we can do something about the Documents the middle class home owner / buyers have entrusted to the financial establishments to keep safe and secure.  For crying out loud, why do they even have those silly rooms with the great big doors in back of their robo signers for?  Appearance?

Cognitive Dissonance's picture

Actually I wasn't dissing you, but instead the fact that the excuse is so ridiculous as to push the boundaries of the surreal. The storage cost (for off site storage at least) isn't that high believe it or not. A buck a box a month is about right.

Problem Is's picture

I'll store the option-ARMs from 2005 last name starting L in my garage for free... I prefer vintage Tangelo's but any sub prime sleaze ball originator will do...

I will pay a premium for any loan docs Robo signed using Timmay or Dodd's signature...

In Fed We Trust's picture

No real ly, they ought to auction of those boxes on Ebay! 

Surely, some one is willing to pay for the evidence, behind the biggest fraud this

country has ever seen.  Even if just to put the boxes into a musuem of some sort.

Paging Paul Allen for the museum.

Paging Matt Tabbai

Commander Cody's picture

I suspect there are many valuable SS #s in those boxes.

cramers_tears's picture

I've got a 480k warehouse that's sitting vacant, I'd let go for $2500/mos on a month to month arrangement.  I'm already making inquiries to the Trustees.  Also, if there are lawsuits pending naming these companies as defendants, the plaintiff's attorney's should be all over this.  Request production of all 16,000/4,500 boxes.  That should put a dent in the Trustee's motion.

But, Control Fraud will prevail as it always does...  Americans, we poor dumb bastards!

Oh, wait, I've got to go...  Prep up for the new "The Bachelor" on ABC tonite @ 8.

Synopsis: A bachelorette wakes up with a mysterious black eye; Brad takes one woman on a date to Catalina Island; much is revealed on a group date to a radio show; Brad invites a woman on a picnic right before the rose ceremony.
kentfinance's picture

every day i think i have seen everything...but then this...

bonddude's picture

Obama and Bush talk about more Fukin Ahole


Onohymagin's picture

18,000 documents proving 18,000 loans, must be worth at least 18,000 x the average mortgage = say 2 billion dollars worth.

They really should store that lot in a bank!

tmosley's picture

Why weren't these documents transferred to the entities that purchased the mortgages?

It seems to me that if these guys are bankrupt, and all their assets have been sold, then these boxes should be shredded.  If they still contain original documentation, that is the fault of the purchaser, and they simply lose.  They should be under no obligation to keep the documents.  If the court wants them kept, then the court should pay for it.

MachoMan's picture

Bingo.  If you get sent notification to come pick up the original docs that you'll likely later need to show up in court, and yet you refuse to do so, then I can't possibly see how you can avail yourself of this fact when the inevitable court showdown occurs.  If they don't want to come pick the shit up, fine, but it'll make their job harder later on.  Destroy the docs and rock and roll.  Snooze you lose.

Cognitive Dissonance's picture

This is the result of a simply cost benefit analysis. What's in those boxes can hurt them more than if they didn't have the boxes.

Meaning the prosecutor/court can prove fraud with them and it's much harder without.

MachoMan's picture

There has to be an electronic or some other copy out there...  If you were "assigned" a mortgage that you never looked at, then I would strongly suspect you will have a very bad day in court when someone scrutinizes the transaction and you have no possible way to prove an assignment.  This is why the original documents are stored and not simply scanned and destroyed...  for the potential court battle where the original may have to be produced.

The cost of keeping the documents cannot remain in perpetuity.

My point is more so for those persons on down the stream, not with the mortgage originators themselves.  Of course the mortgage originators would like to destroy the documents (my guess is the wording of everything is as broad as possible so as to allow them to destroy as many documents as possible)...  this is why they petitioned the court in the first place...  duh. 

However, what I do not understand is why those persons on down the stream, who would presumably need these documents (the originals), could not care less about their destruction.  If they are certain that they do not need originals (many places they don't), then the originals serve no fruitful purpose and, if not necessary, I have reservations about whether a court would likely require dissemination/discovery of the original... 

Ultimately, you can forge any kind of document and, unless they are incredibly enterprising, you can simply compare the signatures, etc., on various documents...  dates of assignment...  etc.  The originals really aren't saving us from anything to which we are not already privy.

tmosley's picture

My guess is that those downstream own MBS rather than regular mortgages.  They likely have no idea they are missing the documents, and no-one who knows, cares, because it isn't their money.

This is corporatism.

Cognitive Dissonance's picture


As a lawyer, and I assume an ethical one based upon your intelligence and empathetic conversations over the months, you see this problem from that point of view.

If however you were a fraudster and Ponzi proponent who is worried not just about jail time, but about your very financial and political survival, all you are thinking about is how to kick the can to the next week. If you don't get to next week, downstream means nothing. The people downstream are up to their necks in this mess or are connected to those who are, either transparently or secretly. A cluster-fuck usually means everyone is involved in some respect or another.

I have come to understand that not only is fraud from 2004 to 2010 being covered up, but fraud from the last 30 years.

MachoMan's picture

I agree that this is probably (certainly?) beneficial to originators outside of the mere warehousing fees.  I just don't understand why down stream assignees would not be up in arms about the issue (or this isn't reported on here anyway).  These are the kinds of scenarios that we, as people who want to change things for the better, love because it pits multiple fraudsters against one another.  Kind of like p itting lawyers against their clients...  outside of a cushy settlement with a captured governmental actor, that would usually yield to all sorts of important morsels/evidence.

In short, I cannot reconcile why those facing putbacks and/or being the party required to proceed through foreclosure would not desperately ensure themselves they have possession of these documents.  If you were certain the fix was in, then that might account for it...  or, if the originals were certain to be unnecessary in any prospective lawsuit, then that would account for it...  or, if by virtue of moral hazard you were not incentivized to care, then that would account for it...  but, I'm still puzzled.  I suspect it's a combination of many things...  but none is really jumping out at me.

knukles's picture

Yeah, and all the remaining electronic copies were signed by Mrs. Roberta N. Umnuts, dated as of January 24, 2011, notarized in the Great State of Hawaii, Divison of Live Birth Records, and just for the record, it was only this morning that Ms. Umnuts visited the U.S. Consulate in Sah-n-nah-nah, Yeah-man to apply for her U.S. visa in order to testify as a character witness in the extradition trial of her her quadriplegic half-witted sister who has been designated an illegal immigrant since found in the front wheel well of a Trans-Fusion 707 at JFK in 1979, which probably places her credibility on par with Jarred Laughner's petition for release on his own recognizance.  

This shit is about as reasonable as Kristallnacht and using the Book Burning as tinder for torching the Reichstag.


eddiebe's picture

Dude you need to do stand up comedy!

DonnieD's picture

Your argument makes perfect sense in a vacuum. But we're talking about the biggest financial fraud in the history of the United States.

Slow learner's picture

there is no liveing intellegence to be made of...It turns good on good; that's what scares the fuck out'a me!!

Xibalba's picture

What documents?

docj's picture


These documents are long gone - they're just trying to get a "Get Out of Club Fed FREE!" card from the judge, now.

Marc45's picture

So if they destroy the original loan docs, doesn't that beg the question of who owns the loan and how do they prove this?

OTH, if they can still prove loan ownership, then it's a moot point.

TruthInSunshine's picture

Evidentiary rules, in all but the most incredibly narrow and extreme cases, require originals (not copies) of documents such as mortgage notes to be submitted to a court of competent jurisdiction, and ultimately, the trier of fact (whether judge or jury), in order to maintain an action on "an instrument."

Many issues of fact arise from the submission of original documents, such as accuracy, the dating of the ink on paper, and other such matters, that can have a highly influential role to play in determining sequence of events and credibility of witnesses.

This is a massive red flag, but I am not seeing how this could benefit the banks who have their documents challenged as to authenticity in future foreclosure proceedings.

Seasmoke's picture

sorry but this is not going to "cut it"

apberusdisvet's picture

But but but............according to several articles on the website, I thought that many of the docs had been purposely destroyed long ago.  Or were they just the Countrywide and WAMU docs?  Anyone know?

LiquidBrick's picture

But but but............according to several articles on the website, I thought that many of the docs had been purposely destroyed long ago.  Or were they just the Countrywide and WAMU docs?  Anyone know?

Some title co's were entrusted to record the docs and the sloppy/inefficient ones would fall many months behind schedule when the market was busy, not paying property taxes, not recording mtges/deeds and trying to profit with interest income spreads from their Departmentals Account ($ that goes to the state, county, etc).

Title co's would usually payoff old mortgages due to increased payoffs from interest but they would cross the line with municipal obligations and sometimes not record at all.

Far messier than we think for sure.

faustian bargain's picture

Why don't they just ship the papers to Wikileaks. I'm sure they can figure out how to store them.

Chris Jusset's picture

Yeah, this is totally surreal ... you can't make this shit up:


With servicer banks increasingly unable and unwilling to provide the original lender docs (since they don't have access to them) to parties curious in seeing if there is a legal case to continue paying their mortgage, what better solution than to have the banks retort that the original document was sadly destroyed in a court-appointed shredding. In that way all the fraud canaries are killed with one stone, and the party responsible is none other than some bankruptcy judge who had given the go ahead for the wholesale destruction.

midtowng's picture

It makes perfect sense for the mortgage servicers. I don't know why they didn't do it sooner.

digalert's picture


"the court told us to destroy the documents"

...and just when you think you've heard it all.

Bob's picture

It worked for Enron and Anderson . . . wait a minute.  Why they asking for permission, anyway?

SheepDog-One's picture

Right, well remember the Enron documents were destroyed in building 7 during 9-11, when a steel structure fell freefall due to a couple office wastebasket fires.

Bob's picture

Obviously I have to defer to you on that, SDOne!  I thought they'd done it themselves.  What a buncha dolts.