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Consumer Advocates Say Federal Robo-Signing Agreements Won't Protect Consumers

April 15, 2011

Our Rubidoux foreclosure defense lawyers wrote last week about the agreements federal regulators made with large banks accused of "robo-signing." The agreements were made under the radar early this month, even as a group of 50 state attorneys general is involved in much more public settlement negotiations with the lenders. In both cases, the lenders are seeking to settle charges against them brought after they were caught submitting thousands of false affidavits in foreclosure cases, a move that pushed foreclosures through the system faster but removed oversight intended to prevent incorrect foreclosures. As the New York Times reported April 11, consumer housing rights advocates are criticizing these federal agreements as ineffective.

Robo-signing got its name because bank employees or their underlings would sign thousands of affidavits a day without reading or verifying their information. This is a form of perjury that could have invalidated thousands of foreclosures in judicial foreclosure states, and temporarily stopped foreclosures in many places as judges scrambled to ensure the process remained fair. The state AGs got together to determine whether there was a prosecutable crime and decide on an appropriate penalty. That group's leadership proposed a settlement designed to address other problems in the foreclosure process, including ending robo-signing and other blatantly illegal practices, foreclosing while a loan modification is pending, and -- in the most controversial provision -- requiring principal write-downs in at least some cases.

The federal settlements reached in early April are expected to de-fang at least some of these proposals, or hurt negotiations between the AGs and the banks. A group of national and local consumer advocates has written a letter to regulators protesting the agreements as ineffective at stopping avoidable foreclosures. Georgetown University law professor Adam Levitin told the Times the settlements were a "sham" worse than no settlement at al, because it gives the banks political and possible legal cover for refusing to negotiate with the states. Tom Miller, the Iowa AG who is leading the group, said the federal agreements would not preempt or affect the group's work.

As West Covina foreclosure defense attorneys, we hope he's right. The federal agreements are generally more lenient than the settlement proposed by the AGs, and they certainly don't contain the principal reduction provision that banks have strongly opposed, so it's not hard to see Levitin's point. If lenders can use the more lenient settlements to convince the public that they are already doing what's reasonable, the AGs will have a weaker starting point for negotiations. That would be a shame, because it would remove an opportunity for the AGs to make meaningful changes to the way loan servicers handle foreclosures. That includes providing accountability and enforcement of the law -- something HAMP lacks that has clearly affected our clients' ability to modify their loans.

At Howard Law PC, we represent borrowers who are tired of excuses and runarounds from their lenders at a time when they badly need a clear answer. We've represented clients seeking loan modifications since the start of the housing crisis, so we're all too familiar with the litany of excuses and delaying tactics from lenders. Clients frequently come to us after spending months, sometimes more than a year, submitting paperwork and making phone calls to their loan servicers, only to be told the paperwork was lost repeatedly or is incomplete for reasons the servicer never originally explained. Our Fountain Valley foreclosure defense lawyers believe servicers do this intentionally because they can make money from late and foreclosure fees and stand to gain nothing by modifying loans owned by someone else. We fight back with aggressive negotiations and, when necessary, litigation that brings the decision on your loan workout in front of a fair, impartial judge.

If you're ready to consider legal action against your loan servicer after months of seeming incompetence, you should call Howard Law today. To set up a free, confidential case evaluation, send us an email or call 1-800-872-5925.