Up to 40 states to conduct joint investigation of improper foreclosures

October 13, 2010 by Todd Murray · Leave a Comment 

Led by Iowa’s Attorney General Tom Miller, up to 40 states’ attorneys general are working together to review the shoddy foreclosure practices that have come to light recently. “We want the companies to put in a system such that this will not happen again,” Miller said in an interview with The Associated Press. “We want to explore what other remedies might be available, in a way that makes homeowners and the general housing economy better off.”

To recap, in about half of the states in the country, lenders are required to file a sworn statement with the court about the underlying facts that give the lender the right to foreclose. The person signing this statement–or affidavit–is swearing under oath that he has reviewed the facts in the affidavit and that everything is accurate. But bank employees have admitted in depositions that they were not actually reviewing the case before signing the affidavit. This comes as no surprise to anyone familiar with the banks’ procedures. As reported by the Washington Post, many banks engage in a practice known as “robo-signing”. For example, the head of GMAC’s foreclosure document processing team signed about 10,000 affidavits per month. By my math, that’s over 60 affidavits per hour, which means GMAC’s robo-signer spent less than a minute “reviewing” each affidavit. Think about this for minute: millions of Americans have lost their houses to foreclosure without banks even taking the time to, you know, make sure that they had the right to foreclose. And courts have been signing off on many of these foreclosures. Awesome!

And robo-signing is not limited just to foreclosures. Most debt collectors rely heavily on boilerplate affidavits signed by the thousands with little or no review of the underlying facts. But like the foreclosure affidavits, courts routinely accept the facts in these affidavits as gospel. My hope is that the foreclosure document scandal will result in more courts and judges viewing all of these boilerplate affidavits with more skepticism.

UPDATE: This Salon.com story details some of the astonishing testimony from several of the employees tasked with signing these foreclosure affidavits. The story is littered with a lot of revealing information, but this is my favorite:

The depositions paint a surreal picture of foreclosure experts who didn’t understand even the most elementary aspects of the mortgage or foreclosure process — even though they were entrusted as the records custodians of homeowners’ loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn’t define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff’s assignor or defendant. She testified that she didn’t know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. “I don’t know the ins and outs of the loan, I just sign documents,” she said at one point.

UPDATE 2: It’s unanimous. All 50 states have joined the probe. Washington Post story here.

States Set To Unveil Joint Probe Into Foreclosures | NPR | October 13, 2010

(photo: http://www.flickr.com/photos/genewolf/147722422/)

Ohio judge rules that Midland Funding used “patently false affidavits” in collection lawsuits

October 9, 2009 by Todd Murray · Leave a Comment 

A ruling in a class-action lawsuit in Ohio casts serious doubts about affidavits being used all over the country to support debt buyer collection lawsuits. According to an excellent story by Larry P. Vellequette in the Toledo (OH) Blade, U.S. District Court Judge David Katz ruled that the commonly used affidavit submitted by one of the nation’s biggest debt collectors was not legal.  Judge Katz issued an injunction against the company, creating doubt about collection lawsuits across the nation that used the same affidavits in support of debt collection suits. In his ruling, Judge Katz found that clerks at Midland Credit had, as a practice, signed affidavits stating that the individual clerk had “personal knowledge” of the debt being collected when they did not possess such knowledge. The person that signed the affidavit, upon which the company’s collection lawsuits are based, was “an entirely random act” based solely on when the affidavit came off the company’s printer. Because the affidavits were false, the judge ruled that the company’s collection process was not legal. The story quotes a strong passage from Judge Katz’s decision: “[i]t is unclear to this court why such a patently false affidavit would be the standard form used at a business that specialized in the legal ramifications of debt collection.”

Based on what I’ve seen and suspected in my time as a collection attorney, the practices discussed in Judge Katz’s ruling are pretty common across the whole debt collection industry. Hundreds, if not thousands, of these boilerplate affidavits are generated each day, and I have strong doubts about whether the people signing them have “personal knowledge” about all, or any, of the accounts. Yet courts across the country continue to accept the testimony in these questionable affidavits as gospel. Perhaps Judge Katz’s ruling is the start of a new trend of courts reviewing these boilerplate affidavits with more skepticism.

Debt collection under cloud: Sandusky woman’s case raises questions nationwide | Toledo Blade