“Mere” Technicalities? OR Gross Malfeasance

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“… maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications — sensible adjustments that allow deserving families to stay in their homes. And if this happens, we’ll have the lawyers to thank.

“These may be technicalities, but there’s nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can’t be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.

“Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume “robo-signers” submitted affidavits attesting that they reviewed all the loan files personally — when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.

Lawyers got it right on the foreclosure mess

Homeowners facing foreclosure protest outside a J.P. Morgan Chase Bank in Oakland, Calif., in July.

by Eugene Robinson, Washington Post
Homeowners facing foreclosure protest outside a J.P. Morgan Chase Bank in Oakland, Calif., in July. (Paul Sakuma/associated Press)
Don’t blame the lawyers. The crisis over faulty or fraudulent paperwork in mortgage foreclosures — which is either a big deal or a humongous deal, depending on which experts you believe — is the fault of arrogant, greedy lenders who played fast and loose with the basic property rights of homeowners.Banks and other lenders, it seems, made statements in courts of law that turned out not to be true. Because judges have such an underdeveloped sense of humor when it comes to prevarication, this mess may be with us for a while. 

The mortgage industry would love to blame the whole thing on predatory, opportunistic lawyers who are seizing on mere technicalities to forestall untold numbers of foreclosures that should legitimately proceed. The bankers are right when they complain that the delays are gumming up the housing market, as potential buyers for soon-to-be-foreclosed properties are forced to bide their time until all the questions about documentation and proper title are answered.

But it’s the bankers’ fault that there are so many instances of foreclosure documentation with legal loopholes big enough to drive a moving van through. During the years of the real estate boom, lenders cut corners with paperwork to make as many loans — and sell them to other lenders, which often sliced and diced them into securities that were then sold to investors — as quickly as possible. This haste and inattention to detail, now coming to light, are partly responsible for the current crisis.

Laws vary from state to state, but all accept the principle that borrowers who fail to meet the contractual obligation to pay their mortgages can be subject to foreclosure and eviction. The process is devastating for families and for neighborhoods. In many cases, I believe, all parties would be better off if some way could be found to avoid foreclosure — modifying the terms of the loan, say, by lowering the interest rate or even reducing the principal to reflect the fall in housing prices. I recognize, however, that there are many other cases in which foreclosure is the preferable option or perhaps the only option.

But it’s also necessary that the mortgage holder have the legal right to foreclose. Anyone who has ever bought a house is familiar with the inches-thick stack of documents that have to be signed, sealed, initialed and notarized. It turns out that financial institutions often didn’t dot every “i” or cross every “t” — meaning that in some cases, it may not be clear that the nominal mortgage holder has the clear and undisputed right to take possession of the property.

These may be technicalities, but there’s nothing mere about them. For one thing, if borrowers are expected to play by the rules, lenders should be expected to do the same. For another, there can’t be a functioning real estate market without the ability to establish clear title. Lawyers probing this aspect of the foreclosure crisis are doing the system a favor.

The other big problem is that lenders have been processing foreclosures with assembly-line speed, eliminating delay wherever possible — sometimes substituting electronic signatures for the ink-on-paper kind, for example. In the information age, some of this qualifies as sensible streamlining. But what doesn’t make sense is moving the foreclosure documents along so quickly, and in such overwhelming volume, that the people signing them — whether by computer or quill pen — couldn’t possibly have time to read them. We now know that some individuals, working as processors, have been signing off on up to 10,000 foreclosure documents a month.

In 23 states, every foreclosure must involve a court hearing. Sharp-eyed attorneys, representing delinquent homeowners, have unearthed cases in which high-volume “robo-signers” submitted affidavits attesting that they reviewed all the loan files personally — when, in fact, they had not. This is just the sort of thing that puts judges in a really bad mood.

The Obama administration has declined to call for an official moratorium on foreclosures. This is understandable: In most cases a moratorium would just delay the inevitable, while impeding any momentum the housing market might otherwise be able to build.

But maybe the crisis will make the banks realize that they ought to be doing fewer foreclosures and more loan modifications — sensible adjustments that allow deserving families to stay in their homes. And if this happens, we’ll have the lawyers to thank.

eugenerobinson@washpost.com

8 Responses

  1. There is a lot of argument being made that the borrowers are looking for a free lunch. But the banks are also looking for a free lunch …

    All we got was indigestion, then food poisoning. They are still burping and rubbing their bellies from the decades-long banquets. And worse, they STILL want a free lunch.

  2. I can only imagine how rewarding this current change of tide is for the fearless few who swam upstream for years. Thank you for your diligence in this matter.

  3. I would also thank your readers doing Pro Se work. Myself and thousands of others have been asking questions and taking action on their own behalf. Thank the brave and courageous people just asking for fairness and justice.

  4. Time to put some pork on the butcher’s chopping block. Get those hogs slaughtered (figuratively), already in time for the holidays.

    This would be a ‘holiday ham’ that even vegetarians and Jews could enjoy. The banksters would and should choke on it!

  5. The banksters will soon be standing in line for their measurements. Never again will you bastards over inflate and deflate my neighborhood to provide for your unjust enrichment. Every one of these dirty S.O.Bs and their counter parts belong in jail. Let me know when is time to place the order for the orange jump suits

  6. Lisa–l ove that adage!

  7. gwen,
    I think the problem is that the banks want a free breakfast and dinner as well. There is another old adage that says something like “Pigs get fat but hogs get slaughtered”!

  8. What is most disturbing in my opinion is the old adage of “what’s good for the goose is good for the gander”. There is a lot of argument being made that the borrowers are looking for a free lunch. But the banks are also looking for a free lunch–they are not being held to the same standards as the borrowers. This is a country of a rule of law–if we are willing to overturn 400 years of property law in the name of “efficiency” or “th’s the way we do it now”, we can toss the constitution out the door. What I will be anxious to see is what happens when one or more cases reaches a circuit court of appeals or better yet the U.S. SCt. For those who practice extensively particularly in the fed courts we know how conservative that group of judges are–will they support the financial instituions and republicans who put them there or will they, as conservative jurists insist the law is followed. To date it appears bankrtuptcy judges and trustees are insisting on “produce the note”. There are few appellate state court decisions let alone federal. However, if we let the banks MERS and servicers convince the AG’s, Congress and the Administration that we must “amend” the laws so “this will pass”, then the American People should be really angry and many will tkae up those vaunted Second Amended Rights (I don’t own a gun and never will–the courts are my recourse). People are angry about this and they should be–but shoving it under the rug, making retroactive laws and thumbing our nose at 400 years of property law is not solution–there should be no institution that is “too big to fail” if they don’t follow the law.

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