Saturday, May 28, 2011

How Robosigning Affected Our Foreclosure Crisis

All of us when we sign a legal contract we are supposed to read before we sign the dotted line. When documents are submitted to a court they are supposed to be true as submitted. When the documents submitted with a court a document in which someone swears that it has been personally verified the information contained within the document is true and it is not true, you and I would get real trouble. In the eyes of the courts that is considered fraud. This is exactly what the scandal that was unveiled in the latter part of 2010, when it was revealed that GMAC, JPMorgan Chase (JPM), Bank of America (BAC) and One West Bank employees routinely signed hundreds of documents without verifying what they were signing.The problem is that documents were submitted to courts as if the documents were true which enabled banks to foreclose on delinquent properties. Also, Wells Fargo (WFC) and Citigroup's (C) CitiMortgage has been involved in this scandal.

According to John Walsh, the acting head of the Office of the Comptroller of the Currency, in his testimony before Congress, “These deficiencies have resulted in violations of state and local foreclosure laws, regulations, or rules and have had an adverse affect on the functioning of the mortgage markets and the U.S. economy as a whole.” The Federal Housing Administration Commissioner David Stevens talks about punishments will include fines paid to the government and affected homeowners may possibly get loan modifications or a partial forgiveness of their loans’ principal balance. However, if the fines are not sufficient to require a modification in their behavior to motivate them to avoid repeat occurrences in the future it would be basically just slapping these banks on the hand. When these banks have revenues in the billions of dollars and they are fined a couple of thousand of dollars, that’s peanuts to them; they will pay it laughingly.

In another example of potential Robosigning, Citigroup transferred a mortgage from Lehman Brothers to Citi in 2009, which has already ceased to exist. When confronted with its nonsensical filing, Citigroup decided not to foreclose. Instead, it gave the homeowner a meaningful mortgage modification -- $15,000 principal reduction, plus a 30-year fixed mortgage at 3% (oops). Can you imagine if this information was not made public? This family would have been wrongfully foreclosed on.

The cases making it to the news are from large national, international sophisticated banks. How can this be happening? The main reason is that when a bank wants to foreclose by law it has to prove it actually has the right to foreclose (that it owns the note and accompanying mortgage). Sometimes these sophisticated banks, due to the securitization of mortgages and the changes in property-ownership documentation that accompanied such deals can make it hard for the banks to establish clean chains of title and produce original documents. Every foreclosure is different since foreclosure processes vary from state to state and whether it is a Fannie Mae or Freddie Mac note. In addition, there’s all those little details banks don’t want to have to deal with like whether the note holder is on active military duty in a foreign land, whether the homeowner has been actively trying to sell the home as a short sale, whether the note could begin a trial HAMP period, whether the note would qualify for HAFA, other extenuating circumstances, etc. To add to the challenge is the large volume of foreclosures that they must be start and complete in a timely manner. Conclusion: So rather than take the time to generate the correct documentation, the banks cut corners. The probabilities that someone would find out are small, it would require for you and I to prove them wrong that the information being filed in court is incorrect.

This is a serious problem that we all need to be aware of, Banks sometimes don't know which properties they can foreclose on. For example, there has been reported cases of banks who have foreclosed on homes bought with cash and two banks have tried to foreclose on the same property. And so on. So when you are faced with a potential foreclosure, you must request that they produce the note and have your legal counselor help you review the details of it to protect you from a potential wrongfully filed bankruptcy. This problem of foreclosure bad documents have been turning up for years. So why is robosigning practice only coming to light now? the main reason is the volume of them filed in the last couple of years and most people facing foreclosure don't have attorneys to check the documents. Sadly enough, most homeowners don't even contest the foreclosure and banks are counting on this. You as the homeowner need to understand that in bankruptcy a bank has to prove it has the right to foreclose. It has to produce the necessary documents. Not all debtors in bankruptcy have attorneys, and not all those attorneys know what to look for.

Banks must remember that scorned customers will have a very long memory. Consumers have numerous options for their banking needs these days. Also, consumers are in need of the services offered by the banks in some form or another—checking, savings, car loans, home equity loans, mortgages, etc.—for nearly all their adult lives. This is a long-term marriage that can amount to 50-70 years. Why would banks want to alienate customers with that kind of longevity potential? Lots of bad media on these companies who were signing through thousands of foreclosure cases every week with little to no fact-checking. In many cases, these mega banks have been unable to prove they even still held the mortgages (oops). If you are facing a potential foreclosure ask the banks to prove it!


  1. This comment has been removed by the author.

  2. Real estate information in the real estate in the real estate business that the site with the most interesting information that the land of the Republic has shared from the people in the Republic want to trade double This is a free news channel in the news digest

  3. Real estate information in the real estate in the real estate business that the site with the most interesting information that the land of the Republic has shared from the people in the Republic want to trade double This is a free news channel in the news digest