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Article Credits Foreclosure Attorneys With Exposing 'Robo-Signing' Practice at Lenders

October 25, 2010

As Redlands foreclosure attorneys, we have been following the "robo-signer" scandal with interest. As we wrote last week, robo-signing is the name given to the practice at mortgage lenders of having employees sign foreclosure affidavits without reading them or confirming their contents. This is a big deal because this is a form of perjury that could get lenders in legal trouble while delaying or even invalidating the foreclosures. On Oct. 21, the Wall Street Journal published an interesting look at the history of this scandal -- how foreclosure attorneys discovered the problem in the first place, and what happened in the few early robo-signing cases. This could prove to be a model for judges considering how to handle the new flood of cases involving robo-signed documents.

According to the article, a Florida couple's foreclosure was one of the earliest cases of robo-signing. Lilian and Robert Jackson faced foreclosure in 2006, so they hired an attorney, James Kowalski. Kowalski took a deposition -- spoken legal testimony taken out of court, but sworn as if it were in court -- from a GMAC employee who admitted that she routinely signed affidavits without reading them. That revelation led the judge in their case to throw out the foreclosure and order the bank to pay Kowalski's fee. The Jacksons still live in the home. Three years later, a bankruptcy attorney in a different case took another deposition from GMAC employee Jeffrey Stephan -- a subordinate of the employee in the Jackson case. Stephan also admitted to routine robo-signing, and the client ultimately stayed in her home. In response, an associate of the bankruptcy lawyer coined the term "robo signers" on his blog.

Stephan later testified in a Maine foreclosure case that has become famous for helping publicize the robo-signing issue. A pro bono attorney representing the homeowner in that case introduced the testimony as evidence. GMAC tried to get the attorney sanctioned for embarrassing its employees. The court not only refused to do this, but threw the foreclosure out and required GMAC to pay $27,000 in fees the pro bono lawyer would have earned, if he had not been working for free.

It remains to be seen whether lenders will face any criminal or civil penalties as fallout from the robo-signing scandal. (Thus far, at least one "foreclosure mill" law firm is likely headed for criminal charges.) But our Norco loan modification lawyers are focused on how this scandal could help homeowners, so we're interested in the article's information on what courts have done in the past. In the 23 states with judicial foreclosures, how to handle allegedly false documents is up to the judge presiding over the case. Judges may choose to throw the foreclosure out entirely, as in these cases, or may delay it for as long as it takes to check the documentation. At the least, this can delay a foreclosure. And if there are underlying problems with the foreclosure, an experienced attorney can take the opportunity to expose those problems and stop the foreclosure.

Howard Law PC has defended California homeowners facing foreclosure since the beginning of the housing crisis. In that time, we've come to believe that many lenders don't want to grant loan modifications, but they are happy to string out the process and make some more money by pretending to consider an application for a loan workout. As a result, borrowers seeking a loan modification are ignored, given contradictory information, told their paperwork was lost repeatedly and denied a modification for no apparent reason. Our Placentia foreclosure lawyers help clients get real results, through aggressive negotiations with the lender and, whenever necessary, lawsuits. Our goal is to reduce your mortgage payment to a realistic, achievable amount whenever possible.

If your application for a loan modification has been ignored, mishandled or incorrectly denied, you should call Howard Law to see how we can help. To learn more or set up a free consultation, contact us through the Internet or call toll-free at 1-800-872-525.