The robo-signing scandal, in which mortgage servicers including notaries, were routinely rushing through thousands of foreclosure affidavits without verifying documentation, has led to calls for mortgage reform.
The Federal Deposit Insurance Corporation (FDIC) has been pressing for the establishment of national standards on how mortgage servicers should handle consumers’ mortgages and foreclosure procedures. The Mortgage Bankers Association says it supports such reforms.
Pennsylvania Gov. Tom Corbett joined a multi-state committee probing robo-signing and foreclosure fraud in Oct. 2010, and the U.S. Securities and Exchange Commission issued new subpoenas to big banks during its investigation this month.
Mortgage servicers, JPMorgan Chase, GMAC Mortgage, Wells Fargo, Citibank and Bank of America suspended foreclosure sales in some states late last year after a witness in a Florida case testified that forging signatures, changing dates and passing around notary seals to speed up foreclosure processes were common practices.
Most banks have since resumed foreclosures.
At the beginning of the robo-signing investigation, the Conference of State Bank Supervisors in Washington, D.C., said the practice of the servicers’ failure to have a notary witness the transfer of mortgage documents, “may constitute a deceptive and unfair practice in violation of state laws.”
The Massachusetts Supreme Judicial Court this month ruled against U.S. Bancorp and Wells Fargo and Co. in a mortgage foreclosure case, affirming a lower court judge’s ruling invalidating two mortgage foreclosure sales because the banks did not prove they actually owned the mortgages at the time of the foreclosures.
The decision highlights the failure of financial firms to adhere to the rules governing mortgage-backed securities and is likely to lead more borrowers to sue bank servicers and trustees for wrongful foreclosures.
Rick Sharga, senior vice president at foreclosure tracker RealtyTrac Inc., predicted that 1.2 million homes will be repossessed this year. In 2010, 1 million homes were foreclosed.
Pennsylvania foreclosure filings rose 15 percent from 2009 to 2010 and ranks 36th nationwide.