Robosigning in Foreclosures: What Homeowners Can Do About It

If the bank uses robosigned documents, you can challenge the foreclosure.

Updated by , Attorney

One of the worst loan servicing abuses to come to light during the foreclosure crisis was "robosigning." The media and courts slammed the mortgage servicing industry for using false affidavits in thousands of foreclosure cases.

Following the robosigning scandal, several large banks temporarily froze all pending foreclosures. For some homeowners, the robosigning mess created opportunities to challenge their foreclosures in court or negotiate with banks to avoid foreclosure.

Now, robosigning happens much less often, but your case might be the exception. If documents in your case were robosigned, you likely have a defense to the foreclosure.

What Is Robosigning?

As part of the foreclosure process in the 25 or so states that require judicial foreclosure, the foreclosing bank must demonstrate that the homeowner has defaulted on the mortgage and that the bank owns the mortgage (that is, the bank has "standing").

Typically, the bank proves these requisite facts by submitting documents and a written statement signed under oath, called an "affidavit," by a person, usually a bank employee or representative, who has reviewed the documents and is supposed to have some personal basis for believing the facts to be true.

The idea behind the affidavit requirement is to prevent foreclosures on homes when the foreclosing bank can't prove that it owns the mortgage or when the homeowner isn't in default to the degree asserted in the foreclosure papers.

Robosigning Scandal in 2010

In 2010, it was revealed that several large banks routinely used affidavits signed by employees who didn't personally review the documents and had no basis for believing that the homeowner was in default or that the bank owned the loan.

Employees for financial giants like Bank of America, JPMorgan Chase, Wells Fargo, and GMAC testified that they signed many thousands of affidavits a month, spending about 30 seconds on each affidavit, and that they didn't have a clue regarding the veracity of the affidavit or the documents in question—hence the name "robosigners."

Since the time this scandal broke, the public also found out that servicers' employees robosigned all kinds of foreclosure documents besides affidavits, like assignments of mortgage and other documents needed to foreclose. Robosigning occurred in both judicial and nonjudicial foreclosures.

Fallout From the Scandal

A $25 billion settlement among 49 state attorneys general, federal regulators, and five banks was announced in 2012 (the national mortgage settlement), and, in early 2013, federal regulators announced a $9.3 billion settlement with 13 banks over the robosigning scandal and other abuses (the independent foreclosure review settlement).

One company that was involved in the scandal, Bank Processing Services Inc., agreed in 2013 to pay $35 million in fines to resolve allegations over the company's involvement in the robosigning of documents from 2003 to 2009, and one person plead guilty to criminal charges relating to the scandal.

What Effect Does a False Affidavit Have on the Foreclosure Process?

Banks can't legally foreclose on a property if the foreclosure paperwork isn't in order. So, if an affidavit or other foreclosure document a bank submits is false—as any document completed by a robosigner would be—the foreclosure shouldn't go through.

Of course, the reality is that banks foreclosed on thousands of properties based on just such false affidavits and other documents. Once the issue was revealed, here's what happened:

  • In states where foreclosure must go through the court system, more and more judges began taking a closer look at the affidavits and paperwork, refusing to sign off on the foreclosure if the paperwork wasn't in order.
  • In states where foreclosure doesn't go through court, some homeowners brought lawsuits to stop the foreclosure on the grounds that false documents were recorded as part of the nonjudicial foreclosure process.

Challenging a Foreclosure Based on a Faulty Affidavit

Because the robosigning mess called into question the integrity of foreclosure paperwork, courts are more likely to scrutinize affidavits and other foreclosure documents. They're also more willing to entertain homeowner claims that documentation is faulty or false.

If you want to challenge the foreclosure of your home based on a faulty affidavit or another document, the process depends on whether you live in a state where foreclosures go through court or not.

Also, another option is to challenge the foreclosure in a Chapter 13 bankruptcy.

  • Judicial foreclosure. In about half the states, a foreclosure must go through the state court system. In these states, you simply raise the issue in the foreclosure case.
  • Nonjudicial foreclosures. In other states, a foreclosure may be nonjudicial or judicial. Nonjudicial foreclosures are completed without going to court. This means that the process of raising a claim that the foreclosure documentation is faulty isn't as easy. The homeowner must file a lawsuit to stop the foreclosure and raise the issue. (In a number of nonjudicial foreclosure states, a bank can't foreclose without recording the appropriate documents accompanied by an affidavit attesting to their truth. So, the grounds for challenging the foreclosure in court would be similar to that used in judicial foreclosure states.)
  • Chapter 13 bankruptcy. Homeowners may also challenge a foreclosure in a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, creditors (including mortgage lenders) must file a claim to secure payments on their mortgage under the debtor's Chapter 13 repayment plan. As with all other creditor claims, a homeowner in Chapter 13 may oppose the claim based on the lender's inability to provide the correct documents establishing the debt and sworn testimony to their truth.

Delays in Processing Foreclosures

Because banks can't use robosigners now, it takes longer to get a foreclosure affidavit signed. Instead, bank officers and representatives must actually spend time reviewing the property file, loan papers, and other documents before signing the affidavit.

Opportunities to Negotiate

As a result of the robosigning scandal and sloppy bank paperwork, courts are more inclined to believe that foreclosure documents in any given case is faulty.

So, if a homeowner is able to cast uncertainty regarding the required foreclosure paperwork, the bank might be more willing to negotiate a mortgage modification or another alternative. This option is sometimes preferable over having to prove the accuracy of foreclosure documents in court.

Getting Help

While robosigning is much less likely to occur today, it could happen. Or the foreclosure documentation in your case could be flawed in another way.

Challenging a foreclosure in court or alleging documentation problems in an effort to negotiate with a bank can be tricky. If you believe robosigned documents are being used in your foreclosure or the paperwork has some other problem, consider talking with a foreclosure attorney about your case.

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