February 5, 2015

A “Reasonable Contrary Inference” of Forgery By Wells Fargo

On January 29, 2015, Bankruptcy Judge Robert D. Drain in White Plains, New York, decided a case in favor of a borrower, Cynthia Carrsow-Franklin, in a dispute with Wells Fargo over the bank’s right to foreclose on her home.  Mortgage Factory, Inc. was the original lender in the case. Mortgage Factory assigned the note to ABN Amro Mortgage Group, Inc. Wells Fargo was attempting to foreclose, claiming the note had been indorsed in blank by ABN Amro, and the mortgage assigned to Wells Fargo.

Judge Drain concluded that testimony from Herman John Kennerty, a Wells Fargo manager in charge of the bank’s default documents and part of its assignment team “constitutes substantial evidence that Wells Fargo’s administrative group responsible for the documentary aspects of enforcing defaulted loan documents created new mortgage assignments and forged indorsements when it was determined by outside counsel that they were required to enforce loans.”

In the White Plains case, John Kennerty signed the mortgage assignment. Kennerty was an employee of America’s Servicing Company in Ft. Mill, South Carolina, a subsidiary of Wells Fargo. Kennerty signed as a MERS officer, with MERS as nominee for Washington Mutual Bank.  Kennerty has had a prominent role as a signer of any document in need of a signature since at least 2010, and is well-known to many foreclosure courts. After considering a deposition from Kennerty, Judge Drain concluded:

It is clear, however, that he pretty much signed whatever outside counsel working on the default put in front of him and that these documents often included assignments, including the Assignment of Mortgage, drafted by Wells Fargo’s outside enforcement counsel, to fill in missing gaps in the record. (Doc. 109, p. 17, Case No. 10-20010-rdd, U.S. Bankruptcy Court, Southern District of New York)

Judge Drain also focused on whether Kennerty exceeded his signing authority as a MERS officer and how MERS could readily be used as a vehicle for fraud:

 What these courts do not address, perhaps because the issue was not raised, is that the authorized signing “officers” of MERS, if Mr. Kennerty is a typical example, never actually worked for that company, never had an agreement with that company, never received a paycheck from that company and were, in reality, really officers and employees of the lenders who were MERS members, Dep. Tr. at 99‐102, and, therefore, that MERS could readily be used as a vehicle for self‐dealing and fraud. That is, under the guise of being a MERS officer, an employee of Bank X could purport to transfer a mortgage held by MERS as nominee for Bank Y without Bank Y knowing about it or authorizing it with the exception of the fact that MERS had conferred signing authority on employees of its members, including employees of Bank X. (Id., footnote 19, p. 18)

The Kennerty Assignment was dated July 12, 2010. Three days later, Wells Fargo filed its proof of claim.  This same chronology, with the Assignment dated at the same approximate time that the bank files its claim – occurs in tens of thousands of Assignments filed by Wells Fargo – – but also by Bank of America, JPMorgan Chase, Citibank, Deutsche Bank, HSBC Bank, US. Bank and other big banks.

When the banks did produce mortgage assignments, they were often so sloppy that the assignment date came AFTER the case was filed, as if Wells Fargo Bank, for example, looked into the future, learned that it would soon acquire a defaulted mortgage, and filed the foreclosure case as if the acquisition had already happened.  In almost all cases, the Assignment came after the default, as the foreclosure attorneys were “readying” the file for litigation.

For over five years, the fabrication of evidence in mortgage foreclosures has been well documented.  Mortgage servicers including America’s Servicing Company, DocX, Ocwen, BAC Home Loans Servicing, Litton, Saxon, Barclays, OneWest, and dozens of smaller companies fabricated mortgage assignments, then filed the phony assignments in foreclosure courts and bankruptcy courts throughout the country.  Many bankruptcy judges threw out bank claims because the loan documents just did not support the claims: notes were unendorsed and mortgages were unassigned.

The White Plains case also involved a suddenly-appearing indorsement:

Before the expiration of the bar date in this case, though, Wells Fargo filed another proof of claim, amended Claim No. 1‐2, dated September 23, 2010, which was the same as Claim No. 1‐1 in all respects except one: the copy of the Note attached to Claim No 1‐2 had a second indorsement. In addition to the specific, or special indorsement from Mortgage Factory Inc. to ABN Amro, it also had a blank indorsement, signed by Margaret A. Bezy, Vice President, for ABN Amro. (Id., p.4)

According to Judge Drain, the evidence showed “a general willingness and practice on Wells Fargo’s part to create documentary evidence, after the fact, when enforcing its claims, WHICH IS EXTRAORDINARY.” (Id., at 18.)

Regarding the timing of the appearance of the note with the needed indorsement, Judge Drain wrote:

It is not conclusively proven that this is what happened, but, as discussed above, in the light of the evidence submitted by the Debtor Wells Fargo has the burden to show that the indorsement was genuine, and its only argument, based on the timing of the appearance of the blank‐indorsed Note in the file record, does not address the reasonable contrary inference that Wells Fargo forged it when the Debtor became seriously in default. (Id., at p.29)

Herman John Kennerty was a very prolific signer – though his signature(s) often varied greatly and sometimes he used the name John Kennerty while other times calling himself Herman John Kennerty. On at least one document, his “signature” was witnessed and notarized on a Mortgage Assignment prepared by Florida Default Law Group and filed in the Lee County, Florida official records (Instrument #2010000004571) even though Kennerty apparently forget to sign and the line above his printed name was left blank.

The Kennerty signature was also very useful to other banks.  Examples of Kennerty signing as a MERS officer on over 150 Mortgage Assignments to U.S. Bank – including the “blank line” Assignment – are available on the Housing Justice Foundation website. (thjf.org/pdfs/Kennerty.pdf)

As Judge Drain discussed, Kennerty signed as if he were authorized to sign as a MERS signer for dozens of banks and mortgage lenders, including:

ACCU Funding Corporation

Accredited Home Lenders, Inc.

Act Lending Corporation

AEGIS Funding Corporation

AEGIS Wholesale Corporation

American Brokers Conduit

American Mortgage Express Corporation


Americorp Credit Corporation

Amnet Mortgage, Inc.

Beazer Mortgage

BNC Mortgage, Inc.

Centex Mortgage Co., LLC

Colonial Bank

Credit Suisse First Boston Financial Corp.

Diversified Home Mortgage, Inc.

Diversified Mortgage

Encore Credit Corporation

Equifirst Corporation

Equity Financial Group, Inc,

First Community Bank of Southwest Florida

First National Bank of Arizona

Flick Mortgage Investors, Inc.

Fremont Investment & Loan

Greenlight Financial Services

Homefield Financial, Inc.

Home Funds Direct

Impac Funding Corporation

Lakeland Regional Mortgage Corp.

Meritage Mortgage Corporation


Mortgage Lenders Network, USA, Inc.

New Century Mortgage Corporation

Oak Street Mortgage, LLC

Ohio Savings Bank

OneSource Mortgage, LLC

Ownit Mortgage Solutions, Inc.

Paramount Financial, Inc.

People’s Choice Home Loan, Inc.

Pinnacle Financial Corporation

Premier Mortgage Funding, Inc.

Resource Bank

Sunbelt Lending Services, Inc.

Universal American Mortgage Company, LLC

Yale Mortgage Corporation

Every once in a while, a judge refuses to give rubber-stamp approval to the shoddy documents presented by the banks.  If only there were also just a few prosecutors, unwilling to approve the banks’ conduct.  That also would be EXTRAORDINARY.