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Judges in Foreclosure Cases Increasingly Penalizing Lenders for Paperwork Fraud

November 12, 2010

Our Rancho Cucamonga foreclosure attorneys have followed the robo-signer scandal with interest to see how it affects mortgage borrowers in real life. Many observers have predicted that the scandal won't stop many foreclosures, because most people in foreclosure really are in default on their mortgages, even if the supporting documentation is fraudulent. A Nov. 9 article from the Washington Post suggests otherwise -- at least in New York. In that state, which is a judicial foreclosure state, certain judges have become notorious for their harsh penalties on sloppy or fraudulent mortgage companies. As a result, 20 to 50 percent of New York City foreclosures are being dismissed, the article says, and a few borrowers even have their debts canceled.

As the article notes, judges across the U.S. have the discretion to react to robo-signing and other fraud however they see fit. As a result, it's impossible to predict how these flawed foreclosures are likely to be resolved, and different results are likely in different states. But in New York, judges are gaining a reputation for ruling on the side of the borrower. One judge told the Post he thought it was because his colleagues work routinely with the financial industry and see it produce a lot of inaccurate filings. New York's chief judge recently required lenders' attorneys to personally vouch for their paperwork in order to cut down on fraud, and at least one mortgage lender requires special care for documents filed in certain parts of New York.

The article also cited several recent cases where New York judges delayed or denied foreclosures because of faulty paperwork. In one case, the same employee signed several documents as the vice president of different companies. In another, title records show the lender filed for foreclosure two days before taking ownership of the property. And in a case that could have wider ramifications for the mortgage industry, a judge erased one family's mortgage debt entirely, giving them the home for free if the ruling stands. The judge called OneWest bank disgraceful and condescending in its dealings with the family, which included an offer of forbearance that came after the deadline to respond had already passed. The family also received contradictory sets of paperwork showing different total amounts due.

That case is on appeal, and as South Gate foreclosure defense lawyers, we will be interested to see how it comes out. As a rule, Californians are not likely to see this kind of flood of denials because we are not a judicial foreclosure state. That means California foreclosures aren't getting scrutinized by judges or any other human beings, as we wrote last week. However, Californians trying to fight a foreclosure can still have access to the courts in one of two main ways. One is to file for bankruptcy, which allows a judge to review all of your debts. Of course, this is not an appropriate option unless you're already in a financial bind. A better way for some homeowners to get help from the courts is to file a foreclosure lawsuit challenging the legality of the loan, the foreclosure or the lender's actions. Thanks to the robo-signing scandal, unfortunately, many mortgage borrowers are in a position to sue.

Howard Law PC represents clients trying to stop an unfair foreclosure through loan modification negotiations or through the courts. Because we've represented homeowners throughout the crisis, we know all about lenders' disorganization, repeated paperwork mistakes, contradictory statements, rudeness and more. The robo-signing scandal is spreading that message wide, but anyone who's dealt with a mortgage lender lately knows they were already misbehaving. Our Orange foreclosure defense attorneys are not surprised to see that this sloppiness and arrogance extends to lenders' legal documents, despite the very real risk that judges would discover and penalize those mistakes. We help clients fight back by forcing lenders to demonstrate ownership and fair dealing in a court of law.

If you're facing a foreclosure and you believe your lender has been dishonest, you should call Howard Law to see how we can help. To set up a free consultation, contact us through the Internet or call 1-800-872-5925 today.