Recently I have heard about news that has been on foreclosure overload with recent actions by government and lenders alike bearing down on the mortgage foreclosure freezes, investigations, suspensions and lately court cases all centered on a dubious practice called ‘Robo-Signing.’
WHAT IS ROBO-SIGNING?
Robo-signing, a term coined back in 1999 by consumer and investor advocate Nye Lavalle, to describe the automatic generation of documents. One document processor has represented that she “robo-signed” more than 2,000 a day (one every 13 seconds), making it impossible to verify any material fact in the document let alone the file.
Most recently, attention has been focused on the mortgage lending industry; specifically the larger lenders such as JP Morgan and Bank of America have suspended mortgage foreclosures in over 23 states. Fannie Mae and Freddie Mac have also suspended foreclosure processes until they can assess and regain control.
Here the term robo-signing applies to the practice of mass processing and signing off foreclosure documents with little or no oversight resulting in hundreds, possibly thousands of homeowners losing their homes through incomplete or inaccurate documentation. It has quickly grown to a disaster of epic proportions. The process had gotten so egregious that in many cases the robo-signed documents and affidavits (some inaccurate) were not even notarized until weeks or months later. There are cases where mortgages have been processed that are not delinquent and mortgage loans that the lenders/servicers don’t even own. A majority of lenders acknowledge the serious but believe most of the documents in the process will prove valid. So, the current scandal has caused a delay to the foreclosure process but it is not a reprieve. However, it is giving households some time to straighten out their financial commitments.
Now, firms that buy debts are coming under scrutiny as the flood of delinquent consumer and commercial debt make it through the collection process. Courts require that anyone submitting an affidavit to a court against a debtor must have proof of that claim – proper documentation of a debt’s origins, history and amount. Without this information it is doubtful the documentation meets the legal standard of due diligence. Many of these debt-buying companies take the facts at face value, retaining little more than basic databases on the creditor and the debt.
In the current credit, debt and collection environment it is emphatic that the consumer be aware.
And thank you for making me Your Orange County Real Estate Connection.
Michael Caruso, Broker ABR ABRM CLHMS CRB CRS GREEN GRI
Past President, Orange County Association of Realtors (949) 753-7900