Led by Iowa’s Attorney General Tom Miller, up to 40 states’ attorneys general are working together to review the shoddy foreclosure practices that have come to light recently. “We want the companies to put in a system such that this will not happen again,” Miller said in an interview with The Associated Press. “We want to explore what other remedies might be available, in a way that makes homeowners and the general housing economy better off.”
To recap, in about half of the states in the country, lenders are required to file a sworn statement with the court about the underlying facts that give the lender the right to foreclose. The person signing this statement–or affidavit–is swearing under oath that he has reviewed the facts in the affidavit and that everything is accurate. But bank employees have admitted in depositions that they were not actually reviewing the case before signing the affidavit. This comes as no surprise to anyone familiar with the banks’ procedures. As reported by the Washington Post, many banks engage in a practice known as “robo-signing”. For example, the head of GMAC’s foreclosure document processing team signed about 10,000 affidavits per month. By my math, that’s over 60 affidavits per hour, which means GMAC’s robo-signer spent less than a minute “reviewing” each affidavit. Think about this for minute: millions of Americans have lost their houses to foreclosure without banks even taking the time to, you know, make sure that they had the right to foreclose. And courts have been signing off on many of these foreclosures. Awesome!
And robo-signing is not limited just to foreclosures. Most debt collectors rely heavily on boilerplate affidavits signed by the thousands with little or no review of the underlying facts. But like the foreclosure affidavits, courts routinely accept the facts in these affidavits as gospel. My hope is that the foreclosure document scandal will result in more courts and judges viewing all of these boilerplate affidavits with more skepticism.
UPDATE: It’s unanimous. All 50 states have joined the probe. Washington Post story here.