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October 7th, 2010

Q&A: The “robo-signing” scandal

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Earlier in the week, we published a post that detailed the servicers and states affected by the robo-signing issues plaguing the mortgage industry. I came across an article from ProPublica.org today that published an interview with Geoff Walsh, an attorney with the National Consumer Law Center, which will hopefully serve to answer any more questions you may have about this ongoing problem.

Here are a few questions and answers from ProPublica’s article:

What should people make of this robo-signer scandal that just keeps getting bigger? It’s getting so much attention, but isn’t it just one of the many problems homeowners have experienced with mortgage servicers?

What’s coming out now about the robo-signers in particular is the fact that just about all of the major loss mitigation initiatives, including the federal efforts by the Treasury with the [Home Affordable Modification Program], all rely completely on these same people, the mortgage servicers. To me what the robo-signer issue shows clearly is that the industry is on this path to foreclose as many cases as they can, as quickly as possible with as little work as possible.

There’s no reason to be skirting the law and sending in fake documents to courts if you have any interest in taking good faith measures to avoid a foreclosure and consider loan modifications like you’re supposed to.

Do you think these problems were in any way inevitable, given the incredible volume of foreclosures these major servicers are handling, or is there some intent behind what we’re seeing?

You have to infer some element of intent in not providing adequate staff to keep track of paperwork. Where you have the kind of very consistent pattern of losing paperwork and delaying making loan modifications permanent basically forever, there is a pattern there that I think shows intent not to comply with laws.

It seems like the amount of protection against wrongful foreclosures and the amount of recourse homeowners have is highly dependent on where they live.

Yes, it really is. There are certain states where foreclosures are carried on completely without any judicial supervision, and they can be carried out in two months, and other states [where] a foreclosure can take a year and half.

What’s the most that homeowners can hope to recover if they’ve been subjected to a process that resulted in wrongful or premature foreclosure?

It depends on where they are in the process. In a lot of states there is a redemption period after a foreclosure sale took place, where a homeowner can stay in the house and still try to pay the mortgage off or take some action to set the sale aside.

In those states where there’s a redemption period and the homeowner is still in it, they’d have some ways to challenge it whether they’re in a non-judicial or judicial state — particularly if the servicer bought property, which is more often than not what happens in these cases.

It’s much more difficult after the redemption expired, and if a third party bought the property. But if you were injured by the sale, if you were harmed financially by the use of financial procedures, you ought to be able to sue for monetary damages for wrongful foreclosure.

Still have a question about the robo-signing issue that hasn’t been answered? If so, be sure to read ProPublica’s article in its entirety, or you can leave us a comment with your question, and we’ll do our best to help answer it.

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2 Responses to “Q&A: The “robo-signing” scandal”

  1. barb Says: October 15th, 2010 at 5:13 pm

    Know a young couple that were foreclosed on in the middle of negotiations of a short sale with Washington Mutual, and Chase foreclosed in az. in August, and couple were still negotiating with real estate agent and interested party and Washington Mutual. Found out a month later that it was already foreclosed on and Washington Mutual had no knowledge of it. Couple received Loan modification papers after the foreclosure. Think that something fishy went on here. Attorney General should look into all the foreclosures in Az.

  2. Tim Manni Says: October 19th, 2010 at 8:34 am

    Hey Barb,

    Sorry for the delayed response. Something has to be wrong when the papers arrive in such a convoluted order like that. What’s the point of a national Short Sale program if the borrowers are going to be foreclosed on anyway?

    Thanks for your comment,
    Tim

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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