In the aftermath of the housing bubble burst, the housing market received a massive jolt from the discovery of serious problems with the foreclosure practices. The problems started at the height of the housing bubble and had been quietly simmering in the background. But after the housing market collapse, several allegations and improprieties were being unearthed almost on a daily basis in 2010, and the issue is far from over.
The deposition of a GMAC loan officer named Jeffrey Stephan opened a can of worms, which revealed deep and widespread flaws in the foreclosure practices of America’s largest banks. In a sworn deposition in Pennsylvania, the accused loan officer stated that he had signed off on up to 10,000 foreclosure documents a month for five years. Furthermore, he said that he hadn’t reviewed the mortgage or foreclosure documents thoroughly. This story made headlines overnight, and he quickly became known as the “robo-signer” for the way he handled mortgage and foreclosure documents in a cursory or robotic manner.
In subsequent developments, a Florida lawyer named Peter Ticktin, who is defending 3,000 foreclosed homeowners, gathered 150 depositions from bank employees of some of the largest banks, who stated they had signed foreclosure affidavits without ever laying eyes on them. This confirmed that the practice of rob-signing was chronic and rampant.
It didn’t take long for the attorneys general of all 50 states to announce an investigation of the shoddy practices banks were accused of using to kick struggling homeowners out of their properties.
Several class action suits have since been filed in the Florida and many other states. Since there is no precedent for many of the causes of action being alleged in these lawsuits, lawyers are unsure about how a wrongful foreclosure action is going to fare in the courts.
A Congressional oversight panel has stated that the implications of these wrongdoings remain unclear, and the infamous “robo-signing” practice may have concealed deeper problems in the overall practices of the mortgage industry. The panel also stated that this could potentially threaten America’s financial stability and undermine foreclosure prevention efforts for the foreseeable future.
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