By Ariana Eunjung Cha
Washington Post Staff Writer
Thursday, October 21, 2010; 12:27 AM
WEST PALM BEACH, Fla. - Nearly a year before the national furor over foreclosures began, Lisa Epstein, a nurse, ran into three other amateur sleuths who separately were investigating shoddy practices at mortgage companies.
While meeting for the first time in November at an old one-story law office in this city, the four strangers compared notes and began to piece together the scope of the problem: All over the United States, big financial firms might have been using fraudulent paperwork to evict struggling borrowers from their homes.
Now tight-knit, the group is largely responsible for setting off the growing firestorm over foreclosures.
Epstein, a Fairfax County native who became an activist after she lost her job and became unable to pay her mortgage, launched a grass-roots movement against the country's largest banks, which are facing the prospects of billions of dollars in soured loans and legal expenses.
Joining her were Michael Redman, whose foreclosure blog drew the White House into the controversy, and Thomas and Ariane Ice, who run a boutique law firm that was the first to depose "robo-signer" Jeffrey Stephan of Ally Financial's GMAC mortgage unit in December.
In addition to trying to educate the public about the issue, the group had also been quietly passing along stacks of problematic documents to state and federal regulators, lawmakers, judges and law enforcement officials.
They pointed out that document processors such as Stephan had admitted in sworn depositions that they had signed off on up to 10,000 foreclosure documents a month, even though they had not reviewed them as legally required. They also shed light on foreclosure cases in which the paperwork appeared to have been backdated, forged or improperly notarized.
Now, at least five major mortgage companies have frozen some foreclosures. Attorneys general from each state have joined forces to investigate, and a federal task force is considering criminal charges in the matter. Some bank stocks have fallen on concerns that the issue of flawed paperwork could be a coverup for something even more serious. And economists worry that the fragile housing market, where one in four houses on sale is in foreclosure, could take a devastating hit.
Although the uproar over foreclosures might seem sudden, for the activists, it was a long time coming.
Epstein, 45, a George Mason University graduate who moved from the Washington area to Florida for the sunshine 13 years ago, first began to suspect something was wrong in February 2009 after she was served foreclosure papers without any acknowledgment that she had applied for a loan modification.
Redman, 35, said he knew there was a problem as early as January 2008, when he was trying to help his fiancee fight foreclosure and noticed that one of the key documents that proved ownership of the loan had suspicious signatures.
The Ices' eureka moment came late one night in early 2009 when Ariane was looking at the 700 cases in their database and noticed that a lot of the problematic paperwork had been signed by the same people.
As the four of them continued to investigate the issue, the months became filled with self-doubt.
"Plaintiffs' attorneys were scoffing at us; judges were laughing. You get to the point where you think, 'Maybe I'm the crazy one,' " said Thomas Ice, 50.
The group members, who are on the east coast of Florida, where nearly half of the homes on the market are in foreclosure, was soon joined by like-minded lawyers, homeowners and activists on the west coast. Together, the growing movement began to organize events at bar association meetings, host happy hours for distressed homeowners, and follow prominent public officials wherever they were speaking to get their attention. They launched Web sites to get the word out to homeowners' attorneys around the country.
Larry Schwartztol, a New York-based staff lawyer with the American Civil Liberties Union, has been working with Epstein's group to investigate whether Florida courts violated due process by short-circuiting normal procedures in foreclosure cases. He said the research the group is doing is "extremely impressive" and "indispensable."
Although there was no formal organization behind their effort, each of the activists took on distinct roles.
The Ices and seven other lawyers at their firm began deposing "robo-signers" at major mortgage companies, and, in an unusual move in the competitive legal industry, they began distributing the transcripts online.
Homeowners' lawyers nationwide began using the documents to defend their clients. Thomas Cox, a lawyer in Maine, saw Ice Legal's deposition of Stephan, the Ally robo-signer, and decided to depose him again for a case in his state in June. Cox was able to get his client's foreclosure judgment vacated.
Redman, who had been working in marketing for the online department of a local car dealership, set up a Web site, 4closurefraud.org, where he aggregated and analyzed key court documents related to faulty foreclosures. It was an instant hit - the Huffington Post of foreclosures - with Redman's snarky commentary, use of large pictures and graphics to explain complex subjects and his apparent glee - signified by an animated laughing "Jerry"- when he discovered a new way to attack the banks.
It was Redman's Web site, which is now being funded by a local lawyer, Carol C. Asbury, that took the lead in drawing President Obama into the foreclosure controversy this month by making a major issue out of a little-known notary bill, several lawyers around the United States said. Redman said that a reader had e-mailed him about the bill that had sailed through the Senate and was sitting on Obama's desk. The bill would make it easier to foreclose because notary signatures would be valid across state lines.
Epstein, a single mom who once worked as a cancer nurse, became the group's liaison to homeowners, setting up an online discussion site for them to vent their frustrations and debate strategies.
For months, she fired off up to five letters a night to officials, judges or anyone she could think of after her daughter went to sleep. Her letters were prone to hyperbole, but her explanations of the potential for fraud in various steps of the foreclosure process were laid out. In one, she wrote to the Florida Supreme Court: "I am outraged by the perfidious harvest poisoning the financial and emotional well being of individuals worldwide due to the appalling opportunism of Wall Street's historic, unrequited love affair with mortgage backed securities."
The first major lender to take corrective action on foreclosures - Ally Financial, which is majority-owned by the U.S. Treasury - has declined to comment about what prompted it to freeze foreclosures Sept. 20, but Epstein, Redman and the Ices say they and others who are defending homeowners applied so much pressure on the company that it would have been difficult for it not to act.
On April 28, one week after the four activists had staged a rally at the courthouse in the state capital, they had their first major breakthrough: The Florida attorney general's office announced an investigation into a "foreclosure mill" law firm called the Florida Default Law Group for allegedly presenting misleading or false documents to courts.
Knowing that the law firm had been hired by some of the nation's largest lenders, Epstein and Redman went to the local courthouse and began delving into its filings.
It wasn't until last month that their work began to draw national attention. The Florida Default Law Group confirmed in court filings Sept. 7 that the foreclosure documents that had been signed by Stephan, the robo-signer, "may not have been properly verified."
Redman posted the news on his Web site on Sept. 14. "ALL OF THESE AFFIDAVITS FROM THESE CHARACTERS ARE INVALID IF CHALLENGED!!!," he wrote, predicting it would affect "HUNDREDS OF THOUSANDS OF CASES!!!"
One week later, Ally Financial announced that it would halt foreclosure sales in nearly two dozen states. At least four other major mortgage companies followed suit.