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The overblown menace of robosigners

By Holden Lewis · Bankrate.com
Tuesday, October 5, 2010
Posted: 3 pm ET

A lot of homeowners face foreclosure. The overwhelming majority of them haven't been making their house payments.

This simple truth has been obscured by the foreclosure paperwork scandal.

In 23 states, foreclosures must be accomplished through the court system. (In the other states, lenders handle foreclosures administratively, although homeowners can choose to defend themselves in court.)

Lenders are overwhelmed by paperwork and time-consuming legal procedures in the 23 judicial foreclosure states. They resort to shortcuts by hiring law firms (dubbed "foreclosure mills" by consumer advocates) that ram foreclosures through the court system as swiftly as possible. According to depositions, some of these law firms employ "robosigners" whose job is to glance at foreclosure files and sign papers that say that the signer has personal knowledge that the legal documents are true. In fact, they lack such personal knowledge.

You know how, when you download a software update on your computer, you have to check a box attesting that you read the end user license agreement, and you click the box, even though you didn't read the contract? That's kind of what the robosigners did, except the stakes were bigger: They were signing papers that took people's houses away.

At least three major servicers -- Bank of America, JPMorgan Chase and Ally -- have suspended foreclosure actions in judicial foreclosure states while they review pending cases. It's too soon to know what the consequences will be.

I frequently talk to a mortgage banker named Michael Moskowitz, president of Equity Now, in New York City. He knows we disagree on a lot of stuff. But we agree that this scandal about robosigners is making a tornado out of a puff of wind.

No one is happy when a homeowner loses a house to foreclosure. On the other hand, I don't like it when deadbeats try to use legal technicalities to weasel out of their debts.

When a judge is confronted by a homeowner who complains that a foreclosure is invalid because the servicer used a robosigner, I hope the judge's first question is: "When is the last time you made a mortgage payment?" The rest is just details.

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23 Comments
Nina
October 12, 2010 at 12:45 pm

I think you're off-base on this one... The banks should take the time to actually have a real person read their legal documents that will foreclose on someone's home.

During the first year I had my mortgage, it was sold three times. I took the time to make sure I was sending my payment to the right place - the banks sure weren't going to cut me any slack if I made a "clerical error" and sent my check to the wrong place!

Holden Lewis
October 11, 2010 at 3:49 pm

What gives them the right to take a house and get a court ordered judgment against someone without proving the very basics?

In most cases, the basics are proven, and someone signed affidavits assembly line style. When someone signs a document without checking every fact in it, that doesn't mean that the document is incorrect.

To turn the question around: What gives borrowers the right to keep a house without paying for it?

John
October 11, 2010 at 3:04 pm

This is one of the most absurd posts I have ever read. I don't even know where to begin. I suppose the biggest hole in this argument is that we should just bow down and let the banks take whatever they claim is theirs without any proof. You have got to be kidding me. What gives them the right to take a house and get a court ordered judgment against someone without proving the very basics? The banks caused this entire mess by giving insane loans to people who could not ever afford them. They ordered appraisals on the homes by telling the appraiser what value they needed. The closed on loans without ever verifying income or assets. Now they want to take the collateral without proving they have the right too.

By the way, anyone who fights this in court (even if they have willing NOT paid their mortgage despite their ability) are not deadbeats. They are well informed consumers who are starting to understand that they too have rights afforded to them under our constitution.

Mr. Holden, you are a fool.

Homeless
October 11, 2010 at 9:02 am

Thanks, for the kinder words. Understand though, that I had somewhere I could go. Most people don't have anywhere else they could go. My children are very young so upheaving them from their home and moving 900 miles away did not affect their social or educational lives at this time. The one thing they are missing is the rest of their family. I am lucky that my mother had the space for the four of us to be able to live with her comfortably. A lot of people do not have that option. If my kids were teenagers I probably would have had a harder time making that decision, also what if everyone else in my family only had a basement? That's ok if you have small children, but no so much with teenagers...
Are there people out there taking advantage of the system? I'm sure there are (just like with any situation). But I am sure there are a lot of people that just do not have any other options and they are keeping a roof over their kids' heads, rather than moving out to the street.

MermaidDelight
October 10, 2010 at 4:35 pm

The servicers employed the "robo signors" to review and sign the affidavits. Then the law firms review those signed affidavits for legal adequacy and file with the court. I agree that the bottom line is that the borrower breached the contract and that the lender had the right to bring the lawsuit. The recent affidavit issue is a technicality that will not prevent the foreclosure.

matt weidner
October 10, 2010 at 8:06 am

Those pesky "details" are called laws. Laws are the foundation of our country. The bankers, lenders and their unethical attorneys have thrown themselves headfirst in a toxic stew. When they try to foreclose the question I hope a judge asks is...Who are you supposed to pay your mortgage to? And yes, details matter.

gmlucas
October 09, 2010 at 7:31 pm

On Tim's comment. Well said, Tim! Your comments are right on point. The courts are currently the last resort for stopping the predatory lending, the fraudulent affidavits, and the other "technicalities" that the lenders think are merely a nuisance. The demand for loans, and the housing price runup, wwre all generated by various Wall Street firms, and those same firms are the ones who were bailed out by our Federal Government. We are now going through a readjustment in housing prices, but the trajedies that accompany this readsjustment are, and will will continue to be, devastating. The lenders knowingly made imprudent loans for the quick profit of the origination fees, and the homeowner who believed the lender's spin, is is now losing his/her home. Shame on the Wall Street firms that created the demand, and shame on the the lenders that originated and sold the loans to those Wall Street firms.

Mike Lygnos, Esq
October 09, 2010 at 7:18 pm

That is a ridiculous analogy. You should not talk about things you do not understand. In many instances, there was predatory lending. The borrower basically "checked the box" without understanding what they were in for, which was sometimes illegal. The mortgage brokers, Wall Street, Banks, etc, all made fast money by offering government guaranteed loans to people who didn't qualify and many have been bailed out by government. Now the Banks have ignored their contractual and statutory duty to try to work out deals with borrowers who have suffered hardships and hired these mill law firms to lie and forge documents needed to foreclose. Before someone loses their home shouldn't the court verify the person putting you out is the owner of the loan and that the amount you owe is accurate. And furthermore, some of these debts were purchased for pennies on the dollar, yet they won't cut the homeowner a break. The Banks cheat millions of people and they are seen as good businessmen. A homeowner doesn't pay his mortgage and he's a deadbeat.