By Agency Reporter

Wednesday, 9 Feb 2011

Citigroup Incorporated, the third-largest United States bank, settled or lost at least five claims in 2010 brought by borrowers who accused the bank of filing fraudulent mortgage documents provided by a Texas firm, Bloomberg said on Tuesday.

In the most recent settlement in December, a bankrupt homeowner in Wappingers Falls, New York, challenged Citigroup’s use of a mortgage “assignment,” which shows the transfer of ownership of a mortgage. It was signed by an employee at Orion Financial Group Incorporated, a Southlake, Texas, firm that provides document services to lenders.

The document was “of fraudulent nature and questionable origin,” the borrower’s attorney, Linda Tirelli, wrote in an August objection to the bank’s claim at US Bankruptcy Court in New York. Citigroup created and filed the assignment after proceedings began because it otherwise couldn’t prove its right to collect the debt, she wrote in an e-mail. The bank denied the allegations and didn’t admit liability in the settlement.

Attorneys-general in 50 states are investigating the industry’s use of mortgage assignments as part of a wider probe into faulty foreclosure methods, according to Geoff Greenwood, a spokesman for Iowa attorney general Tom Miller. Last month, a Massachusetts court ruled that two foreclosures by Wells Fargo and Company and US Bancorp were invalid because assignments presented in those cases failed to prove the chain of ownership of the mortgage, sending financial stocks down.

Bankruptcy judges are “appropriately skeptical” when mortgage servicers claim to have assignments, a US Bankruptcy Court judge in Nashville, Tennessee, Keith Lundin, said in an interview.

“They have got to show me more than their swearing that they have the right,” he said. “They are going to have to connect up the dots back to the note and the security agreement, which would be the mortgage.”

Harold Lewis, an executive with the CitiMortgage subsidiary, told Congress in November that the bank reorganised foreclosure operations last February, helping it avoid the faulty affidavit-signing practices that forced peers such as JPMorgan Chase & Company to temporarily halt home seizures last year.

Source: Punch