The attorney general of Texas has joined the dispute over alleged fraudulent foreclosure practices by the mortgage lending industry.
Compelling evidence has been accumulated nationwide to demonstrate that lenders are foreclosing on mortgage notes without following all the correct legal procedures. Some folks say the tendency of the banks to cut corners (in order to speed up the foreclosure process) amounts to nothing more than sloppy business practice. According to these folks, when a homeowner stops paying on a legitimate mortgage debt it is only proper that a foreclosure should occur. They see no point in questioning whether the guy who actually does the foreclosing is the exact person who has the legal right to do so.
Other folks see a dark conspiracy by the lending industry. They claim individual lenders are often unable to produce proper legal evidence that they are the entity that has the legal right to foreclose. It seems banks were sloppy about filling out the correct paperwork when they sold loans to each other and when they bundled them into mortgage backed securities. They were also sloppy about filing all the correct papers in the courthouses. In many cases they are alleged to have backdated papers, falsely notarized signatures, and instructed employees to sign the signatures of their bosses. All this to provide a fraudulent paper trail to prove their right to foreclose on particular properties.
The tempest has been brewing for at least a couple of years, with many lawsuits filed along the way, but it seems to be about to reach a climax. Three big players in the mortgage lending arena, JP Morgan Chase, Bank of America Corp., and Ally Financial, have recently halted foreclosures in 23 states (where courts have jurisdiction over home foreclosures) in order to take time to defend against allegations of fraudulent business practices.
On October 4, 2010, Texas Attorney General Jim Abbott asked 30 loan servicers operating in Texas to stop foreclosures pending a review of business practices. Abbott asked for "a halt on all foreclosures, all sales of properties previously foreclosed upon and all evictions of persons residing in previously foreclosed-upon properties." In a letter to the loan servicers he suggested they may have been guilty of violations of the Texas Deceptive Trade Practices Act. Abbott specifically cited the following business practices involving so-called robo-signers:
1) Signing thousands of documents per month,
2) Signing documents without reading them,
3) Signing affidavits which falsely claim personal knowledge of facts,
4) Signing affidavits which falsely claim the affiant reviewed attached documents,
5) Notarizing documents prior to signing by the signer,
6) Notarizing documents when the signer was not present before the notary,
7) Filing documents with records attached that did not correctly reflect loan payments, charges, and advances.
Abbott asked the lenders to respond to his request on or before October 15. Many other state attorneys general are taking similar steps.
On October 6, U.S. Attorney General Eric Holder said the Justice Department would look into media reports that loan servicers improperly used robo-signers to process foreclosure orders.
Will this lead to a months-long moratorium on foreclosures across the United States? And if so, will the moratorium help or hurt the market for homes?
Here are links to blogs and news articles about this topic:
Attorney General Abbott Calls For A Halt On Foreclosures
Press Release at website of Texas Attorney General on 10/5/2010
Justice Dept. Probing Foreclosure Processes
Article at MSN.com on 10/6/2010
JPMorgan, Bank of America Face Hydra of Foreclosure Probes
Bloomberg News article on 10/6/2010
Robo-signer Played Quiet Role In Huge Number Of Foreclosures
Washington Post News Article on 9/22/2010
Amid Mountain Of Paperwork, Shortcuts And Forgeries Mar Foreclosure Process
Washington Post News Article on 9/22/2010
Foreclosure Moratorium Would Only Put Off Pain, Housing Analysts Say
Dallas Morning News article on 10/6/2010
Judicial Foreclosure Versus Non-Judicial Foreclosure
23 States practice judicial disclosure; Texas is not one of them
Ken Lampton, RE/MAX About Dallas
CRS (Certified Residential Specialist)
CDPE (Certified Distressed Property Expert)
The Expert on Dallas M-Street / Lakewood Homes