The past few weeks marked a nation-wide concern with the documentation process of foreclosures, causing large banks such as J.P. Morgan Chase & Co. to issue foreclosure halts. As reported by Liz Moyer of
The Wall Street Journal
the federal and state regulators approve of such moratoriums “while they probe allegations of abusive practices by lenders and loan servicers, including improper reviewers of borrowers’ files and problems with documentation.”
Although the issues vary across the nation, one major issue involves what another
from last Saturday called “Robo Signers”. Robo Signers are essentially employees who sign hundreds of foreclosure related documents a day without carefully reviewing their contents. This is significant - as pointed out by
Gretchen Morgenson of The New York Times
- because employees’ are signing these documents without verifying “crucial” information. Other concerns mentioned by Ms. Morgenson include possible signature forgeries, as well as an argument among banks about who has the right to close the said property, and evidence of inefficient and murky documentation of ownership.
These issues have been challenged for years; however, they became a nationwide concern according to Morgenson in mid-September when GMAC, a global financial services company, announced that it would investigate the legal procedures within its own company and halt foreclosure proceedings in twenty three (23) states.
Bank of America Corp., along with J.P. Morgan, Ally Financial, and Goldman Sachs Group Inc., also suspended foreclosures in at least some states. According to
The Wall Street Journal
, Bank of America continues to look for problems in the process after Freddie Mac, a government-run mortgage-finance company, has urged it to do so.
Despite these urges, the Obama administration - according to
Reuters -“rejected calls for a nationwide foreclosure moratorium, citing concerns about unintended consequences for the still shaky housing market.” Nevertheless, it supports an expanded investigation into these issues that branches into organizations such as the Federal Housing Administration, the Office of the Comptroller of Currency, and the Federal Housing Finance Agency, which looks over Fannie Mae and Freddie Mac. Additionally, the
reports that “as many as forty (40) state attorney generals are set to announce an investigation into the mortgage-servicing industry on Wednesday.” In fact, Forbes reported today that Attorneys General from all fifty (50) states “have initiated a joint investigation into foreclosure procedures.”
It will be interesting to see how the foreclosure process – as well as the financial industry - are effected in the long run. Some believe it will have detrimental consequences. As Kathleen C. Engel, an expert in mortgage law, stated when commenting on the situation: “It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order. Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.” (See
It will also be interesting to see if the moratorium results in more loan modifications, deed-in-lieu of foreclosures, short-sales, etc. For now only time will tell.
*Any information on all blog entries should not be construed as legal advice. If you have any legal issues, please consult an attorney.