Blumenthal To Help Lead Foreclosure ‘Robo-signers’ Investigation

HARTFORD — Attorney General Richard Blumenthal plans to continue leading a multistate investigation into allegedly defective legal documents filed by banks in thousands of foreclosures nationwide, despite the fact that on October 18, one of the banks involved announced it plans to re-engage foreclosure proceedings in 23 states.

In an October 13 release, Mr Blumenthal said he is standing with 12 other attorneys general on the executive committee that will lead all 50 states involved in the inquiry.

Banks, including GMAC/Ally, Bank of America, and JPMorgan Chase, acknowledged filing possibly fraudulent paperwork in foreclosures across the country. The banks employed “robo-signers” who allegedly failed to verify the accuracy of foreclosure affidavits and have documents properly notarized, as required by law.

Bank of America said Monday, however, that it plans to resume seizing more than 100,000 homes in 23 states next week. It said it has a legal right to foreclose despite accusations that documents used in the process were flawed.

It is not yet clear whether other major leaders will follow suit and resume foreclosures in the states that require a judge’s approval. But the move by the nation’s biggest bank could give way to an industrywide effort to push ahead with a wave of foreclosures that have depressed the housing market.

Bank of America Corp says it is confident of its foreclosure decisions in a majority of its questionable cases. The bank is still delaying foreclosures in the 27 other states, which do not require a judge’s approval.

“The basis for our foreclosure decisions is accurate,” Dan Frahm, a Bank of America spokesman, said in announcing the bank’s new approach.

The company said it plans to resubmit documents with new signatures in the 23 states that require a judge’s approval to restart the foreclosure process. It will delay fewer than 30,000 foreclosures.

Filing defective foreclosure documents is potentially a fraud on the court, which can result in dismissal of foreclosure cases and underlying mortgages.

“Banks blatantly broke the law, papering the courts with defective documents to railroad consumers into fast, possibly fraudulent foreclosures,” Mr Blumenthal said. “No consumers should lose their house through Big Finance fraud.

In addition to Connecticut, the executive committee includes the following attorneys general offices: Arizona, California, Colorado, Florida, Illinois, Iowa, New York, North Carolina, Ohio, Texas, and Washington; and the following state banking regulators: the Maryland Office of the Commissioner of Financial Regulation and the New York State Banking Department.

All other states in the nation are also participating in the investigation through their attorneys general offices and/or banking regulators.

In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers, and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer said in an Associated Press report

What’s An affidavit?

In depositions released October 12, many of those workers testified that they barely knew what a mortgage was. Some could not define the word “affidavit.”

Others did not know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.

The depositions paint a surreal picture of “foreclosure experts” who did not 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 could not define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff’s assignor, or defendant. She testified that she did not 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.

Until now, only a handful of depositions from robo-signers have come to light. But the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

Subject To Scrutiny

Even before the foreclosure scandal broke, the housing market was in the midst of an ugly detoxification. Now the escalating crisis is likely to prolong the housing depression for at least another few years. The allegations are opening the entire chain of foreclosure proceedings to legal challenge.

As a result of the investigation, some foreclosures could be overturned. Others could be deemed illegal.

For a housing recovery to occur, all the foreclosed properties — which could account for 40 percent of all residential sales by 2012 — need to be rescrutinized by the banks and resold on the market. Now, with so much inventory under a legal threat, the process will become severely delayed.

As of October 12, the AP reported that BofA has already halted foreclosures in all 50 states, while JPMorgan Chase, GMAC and PNC Financial have stopped foreclosures in 23 states. Wells Fargo has not suspended any foreclosures so far.

Mr Blumenthal said he expects the powerful multistate investigation will hold big banks accountable, determining how and why they broke the law. The Connecticut AG, who is currently a candidate for the US Senate, said at the best, banks engaged in careless negligence, at worst, outright fraud.

“We will fight to find out what happened, when and why, seeking fair and appropriate remedies for consumers,” he said. “Bankers routinely invoke the rule of law to demand repayment of predatory mortgages they peddled to consumers. The rule of law — requiring proper legal procedure and documentation — must apply equally to bankers. Bankers created this monstrous mess, threatening to unfairly force consumers from their homes and undermine their property rights. We will demand accountability and corrective action to resolve this injustice.”

Associated Press content was used in this report.