State v. Brown Affords Managers in the Mortgage Processing Industry a Cautionary Tale
- Significant jail time can result from overseeing and directing unauthorized robo-signing activities.
- Victims of unauthorized robo-signing include residential mortgage servicers, in addition to homeowners.
On May 2, 2013, Lorraine Brown, former president of DocX, a mortgage document processor, was sentenced to 40 months to 20 years in prison on one count of racketeering in connection with the “robo-signing” of mortgage documents filed in Michigan (State v. Brown, Mich. Dist. Ct., No. 96-12901909-01). Brown pleaded guilty in February to the charge. Her conviction followed an Attorney General investigation into questionable mortgage documentation filed with Michigan’s Register of Deeds from 2006 through 2009.
The Michigan Attorney General (“AG”) launched the investigation in April 2011 after a “60 Minutes” news broadcast prompted concerns with county officials across the state that certain mortgage documents filed in their offices may have been forged.
County officials in Michigan reviewed their files and found documents that appeared to have variations in handwriting, resulting in questions about the authenticity of the documents.
During the investigation, the AG’s office reviewed documents prepared by DocX. The majority of DocX’s clients were residential mortgage servicers for whom DocX would, among other things, accept and record mortgage payments, pay taxes and insurance from borrower escrow accounts, and conduct or supervise the foreclosure process. From at least March 2003 through November 2009, Brown marketed DocX as an outsourcing solution to mortgage servicers for filing and recording mortgage documents throughout the United States. In exchange for this service, DocX was paid $5 to $15 per document. Between 2003 and 2009, DocX generated approximately $60 million in gross revenue.
The AG’s investigation revealed that, instead of having an authorized person properly review the documents filed on behalf of her clients and flag for correction any incomplete or unsigned mortgage documents, Brown directed employees to forge and falsify signatures on unexecuted documents so that DocX could file and record mortgage documents more quickly, resulting in greater revenue for DocX. DocX internally referred to this practice as “facsimile signing” or “surrogate signing.” The AG’s investigation further revealed that more than 1,000 unauthorized and improperly executed documents were created and recorded at Brown’s direction throughout Michigan.
Brown has agreed to plead guilty to similar charges in Missouri and Florida. Based on documents filed in those cases, it is estimated that, between 2003 and 2009, DocX filed over one million documents with forged signatures across the nation.