Over the last two weeks, the entire foreclosure industry has been turned upside down. Bank of America's recent decision to put a halt to all of its foreclosure proceedings in the United States last week was the biggest shoe to drop, after weeks of other banks looking into their own potentially flawed foreclosure processes.
Bad Signatures the Least Concerning Foreclosure Trend
These news-making decisions hinge on one specific element of the foreclosure process: the banks' signing of affidavits confirming the promissory note. In addition, other signatures, including those of notary publics, have been found deficient, thus forcing a halt to thousands of foreclosures nationwide.
Several bank employees have testified and acknowledged in recent months that they have not adequately examined these required (in most states) documents before signing off on the foreclosure process. As a result, many inaccuracies and flawed affidavits are leading to orders of foreclosure. The trail of potentially illegal activity includes forgeries and incomplete examination of title documents, with some employees signing off on thousands of documents each month (as many as 250 per day), with hardly a glance at the information contained within the affidavits.
Thus far, Bank of America and GMAC Mortgage are the only lenders to put a delay on foreclosures in all 50 states. JPMorgan Chase & Co. has shut down foreclosures in 41 states. Wells Fargo & Co. is currently investigating its own processes, but has not halted proceedings during its internal analysis.
So what's to come of this mess? There is already a joint investigation underway with attorneys general from every state and the District of Columbia to reconsider the entire foreclosure process. Initial meetings took place on Oct. 13, but more are on the way, with a potential federal law in the works. In the meantime, states are considering having an independent authority appointed to examine documents related to foreclosure.
Perhaps the most important change might come in the form of increased efforts to modify existing loans.
Whatever the change, this foreclosure break will allow the courts and lenders to pause for a moment, reconsider the entire foreclosure process, and make some much needed changes.