Robosigner Information and Anticipated Results

Oct. 6, 2010 - PRLog -- Defining a Robo-Signer
Large mortgage lenders with tens of thousands of defaulted loans to deal with have been turning to "Robo-signers" to help with the backlog. Basically it works like this...every home that is in a state of foreclosure is supposed to have a professional review the documents for accuracy including whether or not the bank actually owned the property, foreclosure affidavits and other documents. Not only was each property portfolio to be reviewed and signed off on in the presence of a notary public, but without proper documentation, lenders do not have legal standing to foreclose.

Unanticipated Fall-Out
Just when you thought it couldn't get any worse comes the news that robo signers may have inadvertently cost many homebuyers to lose their tax credits just days before the deadline due to the suspension in foreclosure sales. Ally Financial (aka GMAC) has stopped foreclosures in the 23 judicial states due to robo-signing irregularities. Meanwhile, the extension for tax credits expired as of Sept 30th, costing buyers between $6,500 and $8,000 in tax credits.

On the Horizon
As news of the robo-signers continues to escalate, politicians and legal professionals alike are calling for further investigations. California Attorney General Edmund Brown is demanding that JPMorgan prove they are able to comply with state law or cease foreclosures. The Colorado, Illinois, and Ohio Attorney General is reportedly investigating. Senator Al Franken (MN) is asking regulators to investigate Ally/GMAC foreclosures both present and past. Massachusetts Attorney General Coakley has called on BofA and other lenders to halt all foreclosures until investigations are performed. "It's a real mess," said Justice Arthur Schack, a jurist on foreclosure issues who sits on the New York State Supreme Court in Brooklyn. Rep Alan Grayson seems to be using it as part of his platform rally.

And the banks? ...well, the banks just keep telling everyone it will be okay since it is unlikely to have significant impact on business. Hmmm.....where have we heard that before?
Banks make the mess they made even bigger

Fidelity National Financial claims it will not be hit by additional claims exposure thanks to the robosigning scandal at some of the nation's largest lenders.

Some argue that delay will be a boon to the greater housing market because a smaller inventory of foreclosed properties selling at a discount will put a floor on home prices. Others disagree. There are plenty of empty homes sitting on the market, where the borrowers are long gone and likely unaware that they have any recourse.

This argument is especially onerous to someone who has closely observed the mortgage modification mess for two years. Ignoring a former distressed homeowner because they are 'unaware' of their options completely ignores the banks unwillingness to assit those homeowners when they were involved in foreclosure, and the overwhelming PR campaign against and sandbagging of professional efforts to assist those same distressed homeowners.

A Big Problem
Attorneys representing homeowners and former homeowners are already contemplating mass action litigation due to the potential widespread abuse of the system which may have led to thousands or even tens of thousands being evicted and foreclosed upon erroneously. GMAC is not the only lender to engage in Robo-Signers; JPMorgan Chase is also under scrutiny as a former Robo-Signer reports having signed off on up to 18,000 foreclosures in one month.

According to recent testimony from ex-employees, it wasn't unusual to sign-off on up 750 foreclosure related documents each week. With a standard work week that would represent roughly 30 seconds per document with some of the most notorious robo signers putting in far less time per document. Concerns over the quality of review and evaluation are expected to further contribute to the questionable practices and documentation errors plaguing the industry. What's the likely outcome for real estate investors? Long, slow processing times.

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