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The Banks Promised to Clean Up Their Act -- So Why Are They Still Using Robo-Signers to Engage in Foreclosure Fraud?

After halting foreclosures for a time last fall, the banks have continued to submit mortgage papers "of questionable validity."
 
 
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In what was dubbed last year as "foreclosuregate," banks began relying more heavily than ever on so-called robo-signers and foreclosure mills -- offices staffed by underqualified foreclosure "experts" -- to cut corners during the foreclosure process, often wreaking havoc on homeowners' lives. In response, the big U.S. banks promised to clean up their act. According to a new report from Reuters, that has not come to pass:

SPECIAL REPORT: Banks still robo-signing, filing doubtful foreclosure documents

NEW YORK/IMMOKALEE, Florida, July 18 (Reuters) - America's leading mortgage lenders vowed in March to end the dubious foreclosure practices that caused a bruising scandal last year. But a Reuters investigation finds that many are still taking the same shortcuts they promised to shun, from sketchy paperwork to the use of "robo-signers."

You might remember that last fall, banks halted foreclosures in 23 states, ostensibly so they could address allegations of foreclosure fraud. Throughout the fall and winter, the banks started to engage in foreclosures once again, claiming they had reviewed their procedures and were confident they could move forward without incident.

This spring, 14 of the banks signed consent orders at the behest of the federal Office of the Comptroller of the Currency, promising "further internal investigations, remediation for some who were harmed and a halt to the filing of false documents. All such behavior had stopped by the end of 2010, they said."

However, Reuters reports that at least five of those 14 banks, plus a half dozen other large institutions, have continued to submit mortgage papers "of questionable validity."

The AP has dug up similar findings. According to an article published Tuesday, "[c]ounty officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as 'robo-signing,' remain widespread in the industry."

Furthermore:

Since then, suspect paperwork has been filed not only with foreclosures, but also with new purchases and refinancings. Critics say the new findings point to a systemic problem with the paperwork involved in home mortgages and titles. And they say it shows that banks and mortgage processors haven't acted aggressively enough to put an end to widespread document fraud in the mortgage industry.

"Robo-signing is not even close to over," says Curtis Hertel, the recorder of deeds in Ingham County, Mich., which includes Lansing. "It's still an epidemic."

Robo-signing isn't the only problem with the banks' foreclosure processes. Reuters also reports that "troves" of original mortgage documents are missing or non-existent. Apparently the documents were a casualty of the 2004-2006 rush to hand out home loans so the banks could sell them to Wall Street investors for shady "mortgage-securitization trusts." Therefore, courts are starting to find that the trusts don't actually own the mortgages in question.

The result is that trusts may be out many billions of dollars, says Matthew Weidner, a lawyer who specializes in mortgage litigation. If proper procedures are followed now, foreclosures could slow to a trickle. And a cloud would hang over title to millions of homes, potentially further depressing the housing market.

There are many confusing aspects to the foreclosure fraud crisis, but what's at stake -- the livelihoods of American homeowners -- is not complicated at all. The banks have proven that slaps on the wrist and the weak regulations imposed on them will not stop them from conducting business as usual. It's time that the government stop letting them get away with it.

Lauren Kelley is an associate editor at AlterNet and a freelance writer and editor who has contributed to Change.org, The L Magazine and Time Out New York. She lives in Brooklyn. Follow her on Twitter here.

 
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