By Ben Mook
As prosecutors and class-action attorneys grapple with the extent to which “robo-signed” affidavits were filed in foreclosure cases across the country, the nation’s judiciary will have to decide whether to handle them merely as instances of shoddy paperwork — or as frauds perpetrated on the court.
Courts, state financial regulators and attorneys general in every state and the District of Columbia are looking into whether employees at banks and foreclosure processing firms signed court documents that had unverified or false information in an attempt to speed up the process. But, it is uncertain what the impact and response from the country’s judiciary will be.
“If you’re in the process of litigating a case right now, it certainly could be a big deal,” Greg Hurly, an analyst with the National Center for State Courts, in Williamsburg, Va., said. “But, it’s hard to say what the course of action will be. It’s not something the courts saw coming down the pike.”
All of the nation’s state attorneys general and 40 states’ banking regulators banded together last week to open an investigation into how widespread the robo-signing issue is. The banks being looked at have said the information in the affidavits is accurate and that it is a procedural mistake as opposed to fraud.
“I think it is somewhere between a glitch and fraud,” said Kendall Coffey, a former U.S. Attorney for the Southern District of Florida who is now in private practice in Miami. “It is more than a paperwork glitch, but the standard for what a court would consider to be fraud is high. Without a factual discrepancy, many courts probably wouldn’t see it as a fraud on the court.”
But Ohio Attorney General Richard Cordray is convinced at least one lender has acted fraudulently. He filed a lawsuit against GMAC Mortgage this month seeking $25,000 for each inaccurate file, claiming the bank was committing fraud under the state’s Consumer Sales Practices Act.
“In this country, the courts have derived very specific rules for dealing with the process of removing someone from their home,” Cordray said. “Frankly, these financial institutions don’t seem to think they have to play by the same rules. I think it’s fraud, and it’s indefensible.”
Bank of America said this month it was halting foreclosures and foreclosure sales nationwide. And last week, JPMorganChase and GMAC, which had already halted foreclosures in 23 states, agreed to expand their review of documents to all 50 states. But the banks are still only halting foreclosures in the original 23 states, including Wisconsin. Wells Fargo & Co. and PNC have said they would not halt foreclosures but would review documents.
Bank of America, JPMorganChase and GMAC are the three institutions being targeted initially by the attorneys general investigation.
In Maryland, the state judiciary’s Standing Committee on Rules of Practice and Procedure is set to adopt a proposed rule letting judges reject an affidavit if he or she has reason to suspect it was not personally signed by the attorney. Judges will also be able to ask the attorney to explain why the foreclosure proceeding should not be dismissed. The rule, which could be adopted Tuesday by the Court of Appeals, would also call for disciplinary action for an attorney who willfully lets someone else sign their name to an affidavit.
“The judges are alarmed at this development, which is an assault on the integrity of the judicial process,” retired Judge Alan M. Wilner, who chairs the committee, wrote in an introduction to the proposal.
Whether courts find evidence of fraud, many agree that the instances of robo-signing have dealt a blow to the integrity of the judiciary system. Patrick B. Bauer, a professor at the University of Iowa College of Law, said the wide-scale filing of false affidavits is sure to have major repercussions.
“If people don’t tell the truth, especially in these court filings, it can really undermine the integrity of the whole system,” Bauer said. “It is a question of accuracy, or correctness, in a matter as consequential as someone possibly losing their home.”
In states like Ohio, Pennsylvania and Florida, where courts hear foreclosure cases, the person signs an affidavit swearing under oath that all of the contents had been reviewed and are accurate. With the robo-signing scandal, the accusations are that the affidavits were signed with little attention, if any, paid to the contents, or were signed by others.
“Effectively the affidavit, in judicial review states, is the equivalent of eyewitness testimony and, with robo-signing; it’s tantamount to having an imposter witness,” Coffey said. “It is very much an integrity issue and integrity is indispensable to the process.”