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At Least Three More Lenders Stop Foreclosures After Admitting to Paperwork Problems

October 6, 2010

Our Yucaipa loan modification attorneys wrote recently about GMAC Mortgage, the mortgage arm of Ally Bank, suspending all foreclosures in 23 states after discovering problems with its paperwork. Some observers predicted that other banks would soon follow, because the underlying practices were industry-wide. Thus far, this is turning out to be true. On Sept. 29, CNBC reported that JP Morgan Chase is also temporarily suspending its foreclosures while it looks into the truthfulness of affidavits signed to support those foreclosures. This is expected to affect about 56,000 foreclosures currently being heard in court. On Sept. 30, the Washington Post's Political Economy blog reported that an executive from OneWest Bank, the successor to the failed IndyMac, admitted that nobody on her team reads the 6,000 documents they sign in a week. And on Oct. 1, Bank of America followed suit by temporarily stopping foreclosures in 23 states.

The problem in all of these cases is that the affidavits themselves say the signer has verified the information and knows it to be true. Signing an affidavit is legal testimony that this statement is true. Thus, all of the lenders that have admitted to not reading or verifying the information could be perjuring themselves. This casts doubt on the legality of the underlying foreclosures. In OneWest's case, the executive said a third party checks the document completely -- that third party has admitted to handling notarization incorrectly, and one of its subsidiaries is under criminal investigation in Florida. At Chase, a spokesperson said the employees who signed were not the same employees who did the fact-checking. That person said Chase doesn't believe the truthfulness of the document is in doubt -- but it's still halting foreclosures until it can double-check its paperwork. A Bank of America executive testified in a deposition that she had signed as many as 8,000 affidavits a month without reviewing them.

This may sound like a technicality, but it's actually an important issue to clients of our West Covina loan modification lawyers. For one thing, lenders have a legal and ethical obligation to ensure that when they foreclose, they do so correctly and legally. The stakes are very high for the people being foreclosed on -- and at this point, we have seen many, many articles about mistakes by lenders resulting in an injustice. In addition, however, we believe this could become an important issue across the mortgage industry. If the practice of signing without verifying is industry-wide, as has been claimed, nearly every foreclosure supported by an affidavit would be suspect. At the least, this would delay foreclosures and give attorneys like us a chance to object when appropriate. If judges are not sympathetic to the lenders, they could also cancel foreclosures entirely. And lawyers might consider looking into the veracity of other paperwork.

Howard Law PC represents mortgage borrowers who need help negotiating a meaningful loan modification with their lenders. Unfortunately, many clients come to us after having tried and failed to negotiate a workout on their own. After months of waiting and inadequate answers -- not to mentioned dwindling savings -- they come to us for help. As it happens, we can often do better, a success that we believe is at least partly because we are Tustin loan modification attorneys. When lawyers call, lenders listen because they know we could sue them for negligence or violations of lending laws. In fact, we often file lawsuits when we find this kind of illegal behavior. But in the end, our goal is to get our clients' mortgage payments to a realistic, sustainable number, whether or not we go to court.

If you're trying to get a loan modification and you're running out of patience and options with your lender, you should call Howard Law instead. To learn more or set up a free consultation, call us today at 1-800-872-5925 or send us a message through our website.