**BREAKING NEWS** Today, Bank of America announced that it is temporarily suspending all residential foreclosures in all 50 states to allow then to further investigate reports of widespread fraud in the mortgage loan servicing industry’s handling of foreclosures. This represents a giant leap forward for consumers who have for years complained that mortgage loan servicing companies have ignored all laws related to mortgage underwriting, servicing and foreclosure. In recent days, several mortgage giants – GMAC, its parent Ally Bank, Chase and PNC have all voluntarily suspended foreclosures, but only in states where judicial foreclosure is required. Bank of America appears to be the only bank who has ceased all foreclosure activity pending its own investigation.
The controversy with large-bank foreclosure processing has to do with several aspects of foreclosure law. Consumers have complained about the inability of big banks to prove who actually owns their loan. When loans are bundled and sold on the secondary market, often the chain of ownership is less-than perfect. In many cases an entity called MERS was the recipient of these securitized loans, then MERS assigned beneficial interests. The question has been who actually has the right to foreclose, according to the banks ability to prove who actually owns the loan.
A second, and for purposes of the banks’ internal investigations more relevant question has arisen in states where judicial foreclosures are required. Recently, attorneys for consumers have won victories by proving that bank representatives who sign an “affidavits” swearing under penalty of perjury that the bank complied with all applicable laws and that the information contained in the foreclosure lawsuit is accurate had no personal knowledge of the underlying facts and performed no independent verification of the information they were testifying to in Court under oath. In some instances, bank representatives signed hundreds of these affidavits a day. Clearly, there is no way a single individual could verify, or have personal knowledge of this much information on a given day.
In California, banks proceed to foreclosure without filing a lawsuit, or having to file the “Affidavit” described in the news in recent days. That being said, however, the banks do have an obligation to ensure that the information upon which the foreclosure is initiated is accurate. Second, the banks do have to file with the County Recorder a Declaration of Compliance with California Civil Code Section 2923.5. These declarations appear to have been signed in the same manner as the fraudulent affidavits, and accordingly, we may soon see many more banks halt their foreclosure activities in even non-judicial foreclosure states. Stay tuned – this may prove to be a very big, however temporary, road block to foreclosure.
David L. Gibbs is an attorney with The Gibbs Law firm, APC. The firmâ€™s practice focuses on issues related to Bankruptcy, Business Law and Manufactured Housing; including community subdivision, pre-purchase diligence and analysis as well as advising community owners on operational, financial and enforcement issues. The firm also represents manufactured home dealers in a wide range of issues. David L. Gibbs is admitted to the Federal Courts for the Central and Southern District of California, and also holds a California real estate brokerâ€™s license. The firm continues to offer a wide range of real estate and business related services as it has done for 34 years from its offices in San Clemente. Mr. Gibbs can be reached at (949) 492-3350.