On the front page of today’s New York Times, Gretchen Morgenson describes the dizzying heights of incompetence and fraudulence at the core of a rising tide of “improperly handled” foreclosure proceedings initiated by some of the nation’s biggest lenders. JPMorgan Chase (JPM), GMAC Mortgage and Bank of America (BAC) have all launched investigations into crummy paperwork that may invalidate a large number of the banks’ foreclosure proceedings.
Here are some ways banks have cut legal corners in an effort to rush homeowners out of their houses.
First off, bank employees have signed foreclosure documents without verifying “crucial information like amounts owed by borrowers.” In other words, banks have been foreclosing on some houses without confirming the outstanding loan balance — a pretty fundamental element in the transaction.
Second, there has been some mind-boggling notarization flimflammery:
- Some documents have been notarized before the documents were prepared
- Some notarizations may have been notarized even though the notaries didn’t witness the signings. As The Times notes, “The law requires” notaries to witness the actual signings.
- Some signatures on foreclosure documents appear to be forgeries — because “a single official’s name is signed in such radically different ways.”
The Times points out that lenders may have cut corners because the number of delinquencies on loans has risen so dramatically, “But analysts say that the wave of defaults still does not excuse lenders’ failures to meet their legal obligations before trying to remove defaulting borrowers from their homes.”
That’s right. Even (maybe especially?) when homeowners fall behind on their payments in dramatic numbers, it doesn’t suddenly become legal to ram reams of unverified paperwork through the foreclosure process.