FBI Taking A Look At Wrongful ForeclosuresOct 20, 2010 | Parker Waichman LLP
The FBI wants to know if big lenders broke any laws when they processed foreclosures. The news of the FBI investigation into possible wrongful foreclosures follows the suspension of some foreclosure proceedings by GMAC Mortgage, JP Morgan Chase, Bank of America and other lenders because of irregularities in the way court documents were processed.
The banks’ actions came after it was learned that some mortgage servicers employed people who could sign foreclosure affidavits so quickly they popularized a new term for them: “robo-signer.” In depositions taken by lawyers for embattled homeowners, some robo-signers said they or their team had signed 10,000 or more foreclosure affidavits a month. Those affidavits say the preparer personally reviewed the files, but in their depositions, the workers acknowledge they had no time to actually do that. In some cases, the affidavits weren’t properly notarized.
The problems have already prompted attorneys general in all 50 states to launch an investigation of the banks’ practices. Despite the uproar caused by the disclosures, Bank of America has already resumed 100,000 foreclosures in the 23 states where they were initially suspended. Bank of America says it has reviewed its foreclosure process and found no significant issues. Only last week, the bank had announced it was expanding the foreclosure review and expanding the suspension in all 50 states. This week’s announcement did not say when foreclosures would resume in the other 27 states.
GMAC made a similar announcement regarding the resumption of foreclosures, but did not say how many foreclosures it would resume. Both banks maintain that their reviews have found no problems with foreclosure paperwork – something many find incredulous, considering the banks’ speed in resolving the issue.
Regardless of what the banks say, it appears that the foreclosure mess is far from over. According to the Associated Press, an unnamed federal law enforcement official says the FBI is in the initial stages of trying to determine whether the financial industry may have broken criminal laws in the mortgage foreclosure crisis.
The same Associated Press report said that judges around the country could also wreak havoc if they come to believe the banks were purposefully playing fast and loose with the foreclosure process. They have authority to penalize bank officials who violate their procedural rules, and could force foreclosures to go to trial rather than issue quick judgments.
Justice Arthur Schack of State Supreme Court in Brooklyn, who’s gained national attention for throwing out flawed foreclosure cases, told the Associated Press that he’s still finding errors.
“It’s nice of Bank of America to issue a press release,” Schack said. “But they’d better file all their paperwork and makes sure it’s done correctly, because they’re asking me to take someone’s house away.”