The Nevada Attorney General just filed felony criminal charges for mortgage fraud, but wait for it, so far it is just two little fish. From the press release:

The Office of the Nevada Attorney General announced today that the Clark County grand jury has returned a 606 count indictment against two title officers, Gary Trafford and Gerri Sheppard, who directed and supervised a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008.

According to the indictment, defendant Gary Trafford, a California resident, is charged with 102 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor). The indictment charges d efendant Gerri Sheppard, also a California resident, with 100 counts of offering false instruments for recording (category C felony); false certification on certain instruments (category D felony); and notarization of the signature of a person not in the presence of a notary public (a gross misdemeanor).

”The grand jury found probable cause that there was a robo-signing scheme which resulted in the filing of tens of thousands of fraudulent documents with the Clark County Recorder’s Office between 2005 and 2008,”said Chief Deputy Attorney General John Kelleher.

The indictment alleges that both defendants directed the fraudulent notarization and filing of documents which were used to initiate foreclosure on local homeowners.

The State alleges that these documents, referred to as Notices of Default, or “NODs”, were prepared locally. The State alleges that the defendants directed employees under their supervision, to forge their names on foreclosure documents, then notarize the signatures they just forged, thereby fraudulently attesting that the defendants actually signed the documents, which was untrue and in violation of State law. The defendants then allegedly directed the employees under their supervision to file the fraudulent documents with the Clark County Recorder’s office, to be used to start foreclosures on homes throughout the County.

The indictment alleges that these crimes were done in secret in order to avoid detection. The fraudulent NODs were allegedly forged locally to allow them to be filed at the Clark County Recorder’s office on the same day they were prepared.

The problem with this indictment is it's just for two low level employees, supervisors. Two title officers overseeing the robo-signing of documents, working for Lender Processing Services Inc..

Some are thinking these charges might lead to a flip, or going up the robo-signing food chain to get to those at the top who are perpetuating the falsification of documents in order to foreclose without legal process.

Naked Capitalism:

That strongly suggests that Masto is, as we suggested earlier, using these indictments as a wedge to go after much broader abuses in the servicing industry. LPS’s biggest business is its Default Services Group, which both managed the operations of foreclosure mills (people with knowledge of LPS charge that the firm even kicks out certain standard form documents for foreclosure mill attorneys to file) and also often acted as the arms and legs of servicers in other arenas (for instance, managing, or more accurately, mismanaging property seized in foreclosure).

LPS has always taken the position that anything it did was at the direction of and with the full knowledge of the servicers. If Masto is shrewd, her objective will be to audit LPSs’ software, since that will demonstrate pattern and practice, and it will be impossible for servicers to deny that processes embodied in ongoing, routinized activities were unknown to them.

We'll see, it seems strange to issue a press release on a felony charge flip. While robo-signing was big news in 2010, due to the lack of indictments, it's still going on. While these paper mills producing fake documents in order to foreclose on people caused banks to put a temporary hold on foreclosures, that temporary halt was lifted.

The MBA just released the latest mortgage and foreclosure survey data for Q3 2011. They show delinquencies only slightly drop while foreclosures increased, up to same levels as Q1 2011:

The seasonally adjusted delinquency rate for mortgage loans on one-to-four-unit residential properties fell to 7.99 percent in the third quarter of 2011.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.08 percent, up 12 basis points from last quarter and down 26 basis points from one year ago. The percentage of loans in the foreclosure process at the end of the third quarter was 4.43 percent, unchanged from the second quarter and four basis points higher than one year ago.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 7.89 percent, an increase of four basis points from last quarter, and a decrease of 81 basis points from the third quarter of last year.

Is the Nevada criminal indictment a slaughter of the token lambs, or will someone high up, making a killing on foreclosures, finally pay the price? Stay tuned....