• 27
  • July
    2011

A while back on this blog, we mentioned the robo-signing scandal that has been receiving more national attention since last year. Essentially, robo-signing refers to the widespread practice of unreflectively mass-processing false and forged mortgage foreclosure documents, the underlying facts of which the companies seeking the foreclosures often had little or no knowledge.

Robo-singing became more publicly known last fall when various major U.S. lenders suspended their foreclosure operations nationwide because of potentially fraudulent practices. A recent article in public interest journal ProPublica took a closer look at how such transactions often occurred at GMAC, one of the nation's largest mortgage servicing companies.

As noted in the article, GMAC's the typical solution to the common housing-boom era problem of lacking the paperwork necessary for foreclosure was essentially to fabricate documents in the name of the companies that originally made the mortgage loan and to submit those as part of the foreclosure bid.

As is well known at this point, GMAC was by no means the only company that acted in this way. Multiple banks have admitted to filing false affidavits in connection to foreclosure bids, in which bank officials claimed actual knowledge of facts about which they really had no actual knowledge.

In recent months, many of the banks who have admitted to such practices have said they have corrected the errors and misjudgments that were responsible for such practices, though consumer protection attorneys have expressed concern that the problem has not actually been dealt with sufficiently. According to such experts, consumers don't often challenge foreclosures, so banks know they need not be greatly concerned that their documents might be challenged. When homeowners do challenge their foreclosure, though, they can and do win their case on the basis of flawed mortgage assignment practices.

Source: ProPublica, "Internal Doc Reveals GMAC Filed False Document in Bid to Foreclose," Paul Kiel, 27 July 2011.