Posted on Friday, January 7, 2011
NEWARK, N.J. - Six lenders who have combined to file nearly 30,000 foreclosure actions in New Jersey this year face the possible suspension of their operations next month under a court order announced Monday by state Supreme Court Chief Justice Stuart Rabner.
The action follows a report submitted to the Supreme Court that, citing depositions and court filings in other states, paints a picture of systemic abuses in the filing of foreclosures that include so-called "robo-signing," in which employees signed hundreds of documents without checking them for accuracy.
In one instance cited in an administrative order, an employee of OneWest Bank, formerly IndyMac Federal Bank, said in a deposition that she signed 750 documents a week, taking no more than 30 seconds per document and relying on others to check the documents' accuracy prior to signing.
Employees testifying in other depositions said they were authorized to sign documents despite having no background in the mortgage industry and little or no understanding of what they were signing.
OneWest and five other lenders were ordered to appear in state Superior Court in Trenton on Jan. 19 to demonstrate why the state shouldn't suspend their foreclosure actions. The others are Ally Financial, formerly GMAC; BAC Home Loan Servicing, a subsidiary of Bank of America; JP Morgan Chase's Chase Home Finance; Wells Fargo Financial New Jersey and CitiResidential Living, a subsidiary of Citibank.
"It's important that the judiciary ensures judges are not rubber-stamping documents that may not be reliable," Rabner said in a conference call Monday.
He said he believes New Jersey is the first state to take such action against mortgage lenders, a view echoed by Ira Rheingold, an attorney and executive director of the Washington-based National Association of Consumer Advocates, which has tracked the foreclosure crisis.
"To have a state Supreme Court haul in these lenders, it's something I have not seen reach this level," Rheingold said.
Spokespeople for Bank of America and Ally Financial said the companies wouldn't comment on the order. Wells Fargo spokesman Jason Menke said the company "intends to comply with the New Jersey court's order and demonstrate why the foreclosures scheduled in New Jersey should move forward." The other companies didn't immediately respond to e-mail or phone messages seeking comment.
Rabner announced that 24 other lenders will be required to submit documentation to a special master, retired state Superior Court Judge Walter R. Barisonek, to demonstrate that there are no irregularities in their handling of foreclosure proceedings. Rabner stressed that that group of lenders has not been accused of wrongdoing and was selected because each had processed at least 200 foreclosures this year.
The six lenders scheduled to appear in court next month have processed more than 29,000 foreclosures in New Jersey this year, Rabner said. The other 24 have filed about 16,000. The total represents nearly three-quarters of the 65,000 foreclosures filed in New Jersey, a number that has tripled since 2006, Rabner said.
More problematic, he said, is that 94 percent of the foreclosures have been uncontested, often due to homeowners' inability to afford legal counsel.
"That means there's no meaningful adversary process to protect them," Rabner said.
The Supreme Court on Monday also issued an order requiring attorneys in all residential foreclosures to certify that lenders have reviewed documents for accuracy and confirmed the accuracy of all court filings.
Homeowners in several states have filed lawsuits recently alleging their homes were foreclosed on even though they were up to date on mortgage payments. In some cases, banks carted away belongings and changed the locks on the wrong homesBy DAVID PORTER , Associated Press