In the 2011 session, I was the chief patron of three reform bills which went after foreclosure fraud and “Robo-signing.” These bills required minimum notice, recordation of assignment interests and prohibited the use of forged signatures on foreclosing documents.
Despite intense industry opposition, one of my bills actually passed the Senate — before dying in the House. (Similar bills carried by Bob Marshall, R-Manassas, also died in the House).
Robo-signing occurs when someone repeatedly signs legal documents without first-hand knowledge that the facts are actually true. It is prevalent in foreclosure proceedings where the mortgage holder (usually a bank or investment trust) has acquired its “title” through purchasing a mortgage-backed security — but never actually obtained the Note or Deed of Trust secured by the property.
Robo-signing was high-lighted in the fall of 2010 by a investigations which documented how homeowners facing foreclosure would obtain “loan modifications” from the loan servicer, then lose their house anyway when a separate entity actually “owning” their debt foreclosed. While this action violated Federal law, it happened so quickly that most homeowners had no time to protect their rights (ed note: my law firm has represented dozens of homeowners illegally foreclosed upon in this manner).
When I filed my reform legislation, we heard from the lending community – this doesn’t happen in Virginia. There are no problems in Virginia. Not here.
This week, the interfaith group VOICE released a report from its investigation of foreclosures in Prince William County. For the record, PWC has been the epicenter of foreclosure nation, with 16,000 foreclosures in the past four years (nearly half of all home sales). No other locality comes close.
VOICE looked at 10% of these property files, which is certainly a scientific sample. What did they find?
In at least 45% of the files, the key documents (e.g. the “Substitution of Trustee” document) were produced at sites being investigated for Robo-signing. Another 25% were initiated by MERS, which is a Reston entity also charged with not documenting its ownership interest. Less than half the files were untainted.
VOICE also found multiple examples of mis-matched signatures or the same person signing for multiple different banks and with multiple different titles. (Look for the name and signature of ”Chris Anderson” in multiple places). The Robo-signing even continued after the investigations came to light, bringing pressure on JP Morgan and Bank of America to temporarily halt foreclosures.
What’s the point? Robo-signing did occur in Virginia. It was used methodically to foreclose on homes, including cases in which the owners still had a right to remain. It ”cut corners” for lenders who did not want to research title or give proper notice to homeowners.
With the real estate market still flat, there is a second wave of foreclosures underway. Some homeowners will certainly lose their houses. But all of them deserve to have their rights taken seriously and to have legal formalities followed.
The Assembly should outlaw Robo-signing. If not now, then when?