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Bankruptcy Judge Rejects Foreclosure Due to 'Robo-Signed' Wells Fargo Documents

November 8, 2010

As Fontana individual bankruptcy attorneys, we were very interested to see a news report about a bankruptcy judge who stopped a foreclosure in New York. Bloomberg News reported Oct. 28 on the case of Tandala Mims, who avoided foreclosure on her Bronx home after a judge rejected paperwork provided by Wells Fargo to show that it owned her mortgage. This was especially interesting because Wells Fargo is the only major lender that has not imposed a foreclosure moratorium in the 23 states that require judicial foreclosures. Until Oct. 27, the bank insisted that its paperwork was in order. But on that day, Wells Fargo announced that it would submit new paperwork in 55,000 cases because some affidavits -- the documents implicated in the robo-signing scandal -- had been prepared incorrectly.

According to Bloomberg, Mims, 49, filed for bankruptcy after losing her job made it impossible to keep up with her mortgage payments. She retrained and got a new job, but makes less money. Wells Fargo had the right to pursue foreclosure later in the bankruptcy process, and submitted documents intended to show that it had the right to foreclose on Mims. Those documents did not hold up, in part because Wells Fargo had acquired interest in her loan a week before attempting to foreclose. Mims had originally taken out the mortgage from Lend America, a defunct company that has been implicated in defrauding the FHA.

From there, the loan was owned by Washington Mutual, which was purchased by JP Morgan Chase. The ownership was transferred through MERS, a company that runs an electronic title registration database and is owned by the nation's biggest mortgage lenders. The bankruptcy judge in Mims's case was concerned that Wells Fargo did not have the physical title to the property, especially since it had more supporting paperwork than it should have for a property it had acquired a week earlier. The judge also noted that a signature on the foreclosure affidavit appeared to be improperly notarized, and that Wells Fargo representatives couldn't answer questions about it. As a result, he declined the foreclosure.

This article provides one answer to questions about how judges might respond to the robo-signing scandal. Each case and each judge is different, but in our experience as Placentia personal bankruptcy lawyers, judges respond poorly to fraud, even if it is a result of laziness rather than intent to deceive. However, one thing that does make this case unusual is the fact that it took place in bankruptcy court. In bankruptcy court, homeowners facing foreclosure might have a better chance of having their documents carefully reviewed, because bankruptcy judges' job is to consider whether claims on a bankrupt person's estate have any merit. In a judicial foreclosure, verifying paperwork is routine -- and in non-judicial foreclosure states like California, there's no judge approving any paperwork. That means we sometimes have to file lawsuits to trigger a careful review of whether the foreclosing company has done its job right.

Howard Law PC can help clients decide whether filing for a bankruptcy is the best way for them to fight an unfair foreclosure. Filing for bankruptcy puts an automatic stay, or court order not to proceed, on all creditors including mortgage holders. This is not permanent, but it gives our clients some time to breathe and our attorneys a chance to gather evidence showing mistakes or violations of the clients' rights in writing the loan, servicing it or foreclosing. Often, our Lake Forest consumer bankruptcy attorneys find mistakes, negligence or even deception at more than one stage of the loan's life. That includes misinformation, delays and conflicting statements during foreclosure as well as inability to document who owns the loan. In all of these cases, we can file suit whenever negotiations fail to stop an incorrect foreclosure.

If you're in default on your mortgage or know you will be soon and you're considering bankruptcy as a way to avoid foreclosure, Howard Law can help. To learn more or set up a free case evaluation, call us today at 1-800-872-5925 or send us a message online.