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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
MEC
October 09, 2010 at 5:15 pm

Excuse me, if a lender submits an affidavit to the court that says the homeowner owes $250,000 when in fact the borrower only owes $249,000 or the borrower has been paying on his/her loan supposedly under a trial modification in which case he/she only owes $245,000 and the Judge enters a judgment for the $250,000, the lender has effectively, using our court systems, stolen that money from the borrower who now owes that amount of money. The house will not bring $250,000 on the auction block so the borrower is liable for the balance.

We put people in jail for stealing a loaf of bread!!!!!!!!!!!!!

Let's just let the banks steal, with the blessings of our courts,
how much, how many foreclosures in the system? millions times thousands, billions of dollars. Yes, let's just do that!!!!!!!!!

Furthermore, do you even care if the proper lender is getting this judgment? Don't you get it, just because a lender files a lawsuit for foreclosure, doesn't mean that lender owns the note or mortgage. So let's just let the banks take houses and steal monies that the lenders have no legal right to. Some other lender does, or a trust may have - yes - it may belong to one of your investment trusts set up for your retirement - but that's okay, we can give it some other lender, really, the banks are sacrosanct and who the h___ are you?

I mean, how out of it are some of you people? The Lenders are making a joke out our country and our legal system.

And two wrongs never make a right!!!!!!!!!!!!!!!!!

Debra James
October 08, 2010 at 4:47 pm

Holden,

I read your articles all of the time, but in this one you wrote some real knuckle-head stuff. First, you quote a bigot, and then try to reduce the impact of his self-proclamation. There's nothing playful about bigotry, it often is the precipice to hatred and violence.

Also, I am glad that Homeless called you out on your undefined use of the term "deadbeat". I am sure that many of the people who find themselves in the foreclosure process due to household economic hardships tried everything that they could to meet their financial obligations before having to give back the keys. Your blanket statment was uncalled for, and not very insightful.

As others have said, it is the bank's responsibility to follow the foreclosure process properly. These 23 states didn't all of a sudden come up with the legal requirement. I don't know why it came to light about the auto-signatures, but there must have been quite a few homes that were foreclosed upon improperly to trigger such an investigation. It makes me wonder if the banks are using the same tactics for the large number of loan modification denials.

Pam
October 08, 2010 at 4:23 pm

Holden - I believe you are overlooking one of the reasons these robo-signers are so hated right now. Sometimes that mortgage paperwork has a mistake on it - like the wrong address. Bank of America has done this on at least one occasion (in Florida they changed the locks on a house they didn't even have the mortgage for). In Pittsburgh they took possession of a woman's house when she was less than 2 months late.

Robo-signers remove the last step of "lemme make sure this is all legit" before foreclosing on a house. I'm sorry for BoA if they have to pay someone a whopping $20/hour to actually *review* the documents, but that's the cost of doing business.

corrie
October 08, 2010 at 2:34 pm

This whole scandal once again exposes the hypocrisy and the double standard of the left wing socialists. What they are whining about now, that notaries were not reading the mortgage/foreclosure documents thoroughly before they stamped them, is the very same thing they were crying wolf about when the mortgage crisis hit. People who were upside down in their homes with exorbitant and crazy mortgages claimed they did not know or understand what they were signing as they did not read them thoroughly, so mortgage lenders were at fault because they did not explain them in detail. People were expecting a pass because they signed something they did not read or understand, and expected to be forgiven for that, and now they want to punish people for doing more or less the same thing, except for the fact they are professionals that DO know what they are signing.

Really, if everyone read every detail of their mortgage document and made sure to clarify things they were not sure about, we would not be in this mess in the first place. Not to mention the fact it is very clear in any mortgage document that if you do not pay, they can take back your house.

So what, notaries are signing the same documents over and over again that literally say the same exact thing- the only difference is the individual's information cut and pasted into the same document they have already read and signed a hundred times. As long as the few important details are checked, who cares if the notary does not read the rest of the document? I know for a fact most legal documents are pre-written templates that information is dropped into and modified as needed for each separate case.

The quicker we put the housing crisis behind us, the quicker our economy will recover, and this just prolongs the crisis. The heart of this debate stems from the fact that too many people feel entitled to get something for nothing. Who wouldn’t want to live rent-free for a year or two on someone else’s dime? Pay your mortgage or you will lose your house. It really should be that simple.

nufo
October 07, 2010 at 2:50 pm

I'm a homeowner trying to keep my house and was sent a modification loan on the tenth of september and was told i needed to pay 1800.00 by twentieth and then turn around a pay 1200.00 by the first of october im struggling as it is how is this any help.Thanks Bank of America

GT66
October 07, 2010 at 2:50 pm

Lewis and Moskowitz, you are really two pieces of work. Yeah, let's just set aside the rule of law since now it isn't in the corporate profit interest. Moskowitz p!ss poor analogy also fails to take into account that the person demanding the keys to the "deadbeat's" house even has the right to demand them. Of course now that all the fatcat cheats are getting scr3wed by their own swindle it's all "boo hoo the law is getting in our way." Too bad. If either of you have the cajones to call your marks deadbeats then at least have the modicum of integrity to recognize and admit you're greedy crooks trying to profit TWICE off those alleged deadbeats.

Holden Lewis
October 06, 2010 at 8:49 am

Homeless, I will be choosier about my words.

But consider what you did. You tried to save the house, but you couldn't, so you moved out. All because of a layoff during a recession. Even though you say you're embarrassed, you have nothing to be ashamed of.

Compare that to the people who remain in their homes for months and months without making their mortgage payments, and then exploit legal technicalities to lengthen their rent-free lifestyles. Those people are shameless.

Also, let's keep in mind that these legal dodges are available in only 23 states. In the other 27 states (including the biggest, California), borrowers aren't "protected" by such legalisms. In California, you can't challenge a foreclosure for a technical reason (such as an improper notarization) unless you make a "valid and viable" offer to repay the debt. Sounds reasonable.

Homeless
October 06, 2010 at 8:40 am

"No one, not even a right-wing bigot, 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."

Please be choosier about your words...I am an avid reader of Bankrate, but I am also someone who has had hard times due to the economy. My husband lost his job 2 years ago, just as we were expecting our second child into the world. We put a down payment down when we bought, I tried to refi when we had the loss of income, but the value had already gone down so much they would not lower the 6.75% rate. We had emergency funds and retirement savings and college savings. It's all gone. We paid off as much debt as possible and paid on our mortgage as long as we could AND attempted to work on a modifcation through Bank of America, with NO results and no responses, unless I called them, which I did EVERY DAY for months. I will not go further about what I think about them. But my family and I are not deadbeats! We will lose our home and had to move cross country, to live with my mother in order to keep a roof over my kids' heads and food on the table. It's embarrassing enough to know that we will lose our house, we lost one of our cars and we will have to file bankruptcy. I don't need to be called a deadbeat too.

Tim
October 06, 2010 at 8:02 am

Bulls*&t. This whole thing is not whether these poor babies get the house in a short amount of time, but is about following the rules - again! They underwrote garbage by skirting the rules, and now they are doing the exact same thing in another part of the mortgage process. They don't want to spend the money to follow the rules, however arcane and complicated. It all comes down to money, and they are once again cheating.

Marcie Geffner
October 05, 2010 at 7:02 pm

Of course we shouldn't let "deadbeats" use "technicalities" to "weasel out" of debts. But we also shouldn't let lenders get away with sloppy legal work and forged signatures. Because if we allow that in the courts, what's next? Lenders can foreclosure on people's loans by checking boxes on an Internet form?