FORT WAYNE – Allen County Recorder John McGauley knew property documents with suspect signatures were prevalent. After all, there were so many that a year ago the nation’s largest banks had to halt foreclosures to deal with the sea of paperwork that could not be trusted.

The problem was so big it spawned a new word to describe it: “robo-signing,” meaning offices filled with low-paid workers signing documents they had never read, documents they were not qualified to sign and often signing someone else’s name.

Still, McGauley was surprised to hear that robo-signing was not limited to foreclosure documents but was being found on thousands of homeownership documents having nothing to do with seized homes.

He was even more surprised when a quick check of Allen County records revealed more than 8,000 suspect documents have been filed here since 2006 – records McGauley’s office is charged with preserving as the final word in property ownership.

“It was just like reaching into a hat where your number was on more slips of paper than it wasn’t on,” McGauley said. “Everything you pulled out was another one.”

But the real surprise was when McGauley looked through the documents for his own home. The mortgage release on the house he and his wife sold in 2005 bears the signature of Linda Green – the most notorious robo-signer in the nation.

“This is the kind of thing that can really upset people because the biggest investment most people will ever make is their home,” McGauley said. “It’s frustrating me.”

It could be frustrating millions soon and frustrating an already-battered real estate market.

If invalid documents are discovered in the chain of ownership, it could delay a home sale or make it difficult for buyers to get a mortgage because title insurers will not write a policy for the property, said Justin Ailes, vice president of government affairs of the American Land Title Association, which represents the title insurance industry.

Banks and other mortgage lenders will not write a home loan without title insurance.

That means your house – even if you’ve never missed a payment or had an ownership dispute – could be impossible to sell until the documents are verified, or it could be impossible to buy your dream home.

“Because of these bad titles, property owners can’t prove they own the properties they think they bought, and banks can’t prove they had the right to sell them,” said Jeff Thigpen, the registrar of deeds in Guilford County, N.C.

In Guilford County, home to Greensboro, a sample of 6,100 mortgage documents filed since 2006 turned up 74 percent with questionable signatures.

Who is Linda Green?

In the late 1990s and early 2000s, a new industry emerged: buying and selling mortgages. Eventually, the practice – doomed by profiteers unconcerned with whether the mortgages would be paid – collapsed some of the biggest banks in the country and wrecked the economy.

Until then, however, banks struggled to deal with the avalanche of paperwork property transactions require, and they turned to document processors.

As home loans were packaged into securities on Wall Street and sold to global investors, demand skyrocketed and lenders and mortgage processing firms hired entry-level employees to sign hundreds of mortgage documents a day.

Sometimes they forged the signatures of executives who were qualified to sign. Other times, actual executives signed the documents without verifying their accuracy. Many of the documents were stamped by notaries even though the people who had signed the documents weren’t present when the papers were notarized, a requirement by law.

All are instances of robo-signing and are potentially illegal. Regardless of whether the actions were criminal, it makes the documents suspect.

Fidlar Technologies provides the software for recorder offices or their equivalent in 225 counties across 15 states, including Allen County. When Fidlar employees were here recently for a training session, they searched the recorder’s office database for documents handled by the country’s two largest document processors – Nationwide Title Clearing of Palm Harbor, Fla., and DocX of Alpharetta, Ga. – and found 8,183 recorded since Jan. 1, 2006.

That’s about two of every 100 documents filed in Allen County in that time period.

“There’s other (firms) suspected of robo-signing, but these two are the most egregious,” said Scott Moore, vice president of sales and marketing for Fidlar Technologies. “The idea (for the search) was just to get an idea of what’s in there.”

What was in there was ugly: Documents where the signer claims to be the vice president of one bank, only to sign as the vice president of another bank the very next day and of a third just days later; signatures that clearly do not match; one signer that claimed to be the vice president of eight different banks in four months’ time; and all of them handled by the two companies most implicated in the robo-signing scandal.

Among the signatures was many for “Linda Green,” who was an employee of DocX.

“60 Minutes” reported in April that the real Linda Green signed documents as the vice president of 20 different banks, though she had never been a vice president at any bank, and that other DocX employees also signed Linda Green’s name to documents because her name was short and easy to spell. They admitted they notarized documents even when they knew the signatures were forgeries. The workers were under pressure to sign as many documents as fast as they could, up to 350 an hour.

The last document with Linda Green’s signature filed in Allen County was recorded in November 2009. DocX was shut down in February 2010, and officials say they do not believe Green has worked in the industry since. But the office that handles property deeds in Essex County, Mass., has received almost 1,300 documents since October 2010 with “Linda Green” signatures; but the signature appears in 22 different handwriting styles.

Nationwide Title Clearing documents were still being filed here in July of this year. It wasn’t until September that Goldman Sachs and two other firms agreed to stop robo-signing.

It was first thought the robo-signed documents involved only properties in foreclosure, as banks cut corners trying to deal with the flood of homes they were seizing. But an investigation by The Associated Press shows robo-signed documents appear on all types of mortgage documents dating to 1998, including documents signed with the same name by dozens of different people or signed without a review of the facts in the paperwork.

No need to panic

Fort Wayne attorney Andrew D. Boxberger, who specializes in real estate, said most people do not need to worry, at least not much.

“I would think – as the courts have done in other areas of the law – they would enforce those documents against the bank to the benefit of the person,” Boxberger said. “The person who correctly signed would not be harmed, I would think.”

Boxberger said that because it was the bank that fouled up the paperwork, not the individual acting in good faith, that a court would require the bank – not the individual – to solve the problem.

“They’re not going to unwind the transaction because of that,” he said. “The banks, on the other hand, should be concerned.”

They are: Nationwide, about 30,000 homeowners have sued banks over foreclosures with shoddy documents, and all 50 state attorneys general are suing them over the practice. An estimated $20 billion settlement was reportedly in the works, but some states are balking because the banks want to be shielded from all future liability, even as millions more suspect documents are coming to light.

Attorneys general in Illinois and Michigan are already pursuing separate actions for robo-signing on non-foreclosure documents; Indiana is not.

Boxberger said solving the document problem should be relatively simple because the vast majority of suspect documents filed in Allen County are mortgage releases, where a bank is saying the loan is paid off and the borrower owes nothing more. Since the bank clearly meant to release the borrower from the mortgage, he said, a new release could be filed to replace the suspect one and the transaction could continue.

But that will take time.

“It would require some research, and with some big bank, that may not be very responsive,” Boxberger said. “The last thing the real estate market needs is more things slowing it down.”

The bigger problems would come if the suspect documents are deeds proving ownership.

“They may have to go back and get affidavits from previous sellers,” Boxberger said. “It’s going to create issues for title companies because they’re the ones insuring clean title.”

Possible benefits

Some homeowners, possibly thousands of them, could benefit from the problem if they’re in foreclosure. Courts are now aware of the problem; judges around the country are throwing out foreclosures over bad documents, and that could prevent or at least delay someone from losing their house.

County recorders are aware of it, too. Some officials in Michigan, North Carolina and Massachusetts have stopped recording documents if they contain signatures of names known to be part of the robo-signing scandal. That, too, could slow or halt property deals.

“We haven’t gotten to that point, and frankly I’m not sure we’re seeing them anymore. We’re certainly not seeing the ‘Linda Greens,’ ” McGauley said. “If they haven’t abandoned the practice, they’ve certainly abandoned the names that are so easily spotted.”

McGauley said it throws the whole system into question.

“For a hundred years, the property ownership system in Indiana was based on trust. You assumed you could trust the documents recorded in the recorder’s office. That has deteriorated,” he said. “This is supposed to be the public record. It becomes history. … At best, it muddies that process; at worst, it turns it into garbage.”

But the real concern is for people who have done nothing wrong but may have a home sale or purchase fall apart because a bank cut corners.

“That’s when you run into a problem,” Fidlar’s Moore said. “If I have my house for sale and you want to buy it, the bank giving you the mortgage requires title insurance. If the title company says they’re not going to insure the transaction because of robo-signed documents, you are not buying my house.”

dstockman@jg.net

The Associated Press contributed to this story.