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'Robo-Signing' Becomes Major Issue as All 50 State Attorneys General Investigate

October 14, 2010

Our Upland loan modification lawyers wrote in early October about the foreclosure moratoria instituted by several major mortgage lenders in response to revelations about false paperwork. Since then, the scandal has grown and acquired a name "robo-signing." This name refers to the source of the problem: the fact that some bank employees signed off on scores of foreclosure affidavits per day without reading them to verify that their contents were true. Because the affidavits are statements that the signer has read the document and can verify its truth, this mean that each one of the cases attached to those documents is tainted by fraud. In response, several major lenders have suspended foreclosures in every state while they review their paperwork. And recently, attorneys general from all 50 states -- their states' top prosecutors -- have announced a joint investigation to see whether homeowners were falsely evicted and whether lenders have broken any laws.

According to an Oct. 13 article from the Washington Post, the AGs have not called for a nationwide moratorium on foreclosures, as other politicians have done. However, Indiana AG Greg Zoeller said the joint investigation would start with the claim that lenders robo-signers did not read the documents they signed, and in some cases falsely notarized documents or forged signatures. This in itself is fraud, although it does not necessarily mean the foreclosed borrowers should not be in foreclosure. Rather, it likely means nobody checked to see whether the foreclosures were valid. This could result in civil or criminal penalties for the lenders if the AGs find it violates state fair dealing laws. If high-level executives knew about it, the penalties could be even stronger. The Post also said that the AGs could use the investigation to pressure lenders into changing how their industry deals with foreclosures, or granting more loan modifications in lieu of foreclosures. Ohio AG Richard Cordray has already sued Ally Bank for improper foreclosures.

This is a big deal in the mortgage industry, and it is becoming a big deal politically as well. Our Lakewood loan modification attorneys are pleased that this is drawing attention to lenders' poor handling of foreclosures. Lenders are dismissing this issue as a technical violation of the law, but it is an important technicality. For one thing, false paperwork could negate a foreclosure, throwing the actual ownership of the property into doubt. It is fraud against the court for which we as attorneys could face professional discipline. For another, there are already reports that this sloppy work has actually resulted in a few incorrect, unjust foreclosures. Because we have followed the housing crisis for the last two years, we are not confident that the facts in all of those affidavits are true and didn't need double-checking. We have simply read too many stories about people foreclosed while they were already in a loan modification or waiting to hear about one.

Howard Law PC aggressively represents clients who are seeking a loan modification from a lender that does not seem to care. Throughout the housing crisis, we have read and written about the careless way that lenders treat loan workout applicants -- losing paperwork repeatedly, ignoring calls and letters, long delays and denial of requests without explanation and sometimes in violation of the law. Our Santa Ana loan modification lawyers believe borrowers (who are also bank customers) deserve fairer treatment. We will step in to enforce fair treatment whenever we believe our clients' rights have been violated. When possible, we prefer to negotiate a loan modification without going to court, but we can and will sue when that's not possible.

If you're trying to get a loan modification, but you're getting the runaround from your lender, you don't have to put up with it. Call Howard Law today to discuss how we can help. To learn more or set up a meeting, you can send us an email or call toll-free at 1-800-872-5925.