Despite banks’ assurances that they’re fixing foreclosure documentation problems and that the crisis may amount to a “blip in the housing market,” the lawyer who helped spark the foreclosure furor said that the banks’ solutions to the problem have so far been inadequate and don’t address the underlying structural deficiencies that plague the foreclosure process.
Banks have defined the problems as procedural errors that “can be fixed in the near term” and did not lead “to foreclosures which should not have otherwise occurred.”
But Thomas Cox—whose deposition of GMAC robo-signer Jeffrey Stephan brought fresh scrutiny on the foreclosure process—told me that in Maine, where GMAC has resumed foreclosure sales, the fixed and re-filed documents he’s seeing are “more of the same, cheap stuff.”
“There’s a structural mess in their departments that they’re not fixing,” Cox told me. “[Banks] refuse to organize their servicing departments in a way that would produce accurate results. There’s a foreclosure department that doesn’t talk to the department handling modifications.”
(We’ve also reported on homeowners caught between the divisions of the banks that are trying to help them keep their home and the divisions that are plowing forward with foreclosure proceedings.)
“It’s a structural problem that led to these bad affidavits, because they set it up like an assembly line. They won’t structure a servicing department so that one person is the go-to responsible person for a homeowner’s file.” Cox said. “I’ve seen no evidence yet that they’ve changed that structure.”
He added: “They’ve done such a great job of PR, saying they’ve reviewed their files and there’s really no problem in underlying documentation systems and basically all the facts are correct.”
Cox, who says he can only provide a “boots on the ground experience,” is hardly the only one who thinks the problem is systemic.
In testimony before the Congressional Oversight Panel yesterday, Katherine Porter, a University of Iowa law professor and expert on mortgage servicers, noted that despite banks’ attempts to narrowly characterize the problems as minor technicalities, the flaws in the process are far from fixed [PDF]:
The problems in such cases range from the imposition and collection of improper fees, a lack of standing to foreclose in judicial foreclosure states, the pursuit of foreclosure without rights in the note and mortgage, mortgage origination fraud, or liability to investors for poor underwriting or improper servicing. The key point is that the vast majority of the alleged problems cannot accurately be described as “technicalities.”
“Because [the banks] are being allowed to control the definition of error and are being allowed to audit themselves, we cannot have confidence in such reports,” Porter noted.
Weeks after the discovery of problems with foreclosure documentation, Bank of America, GMAC, and JPMorgan Chase—all of which had previously halted foreclosures—have resumed some or all of them.
Bank of America this week reported finding some errors in the first several hundred cases it examined, but according to the bank none serious enough to result in wrongful foreclosure. It’s currently resubmitting documents in more than 100,000 cases.
Wells Fargo, which had largely managed steer clear of the scandal despite our report and others ($) showing flaws in the company’s foreclosure process, just yesterday admitted to similar errors. The bank is refiling documents in 55,000 foreclosure cases but is not stopping foreclosure proceedings.
Housing and Urban Development Secretary Shaun Donovan has said that the problems are not “systemic” but are “an issue with particular institutions.”
Other administration officials, including Federal Reserve Chairman Ben Bernanke, said that regulators were still investigating “to determine whether systemic weaknesses are leading to improper foreclosures.”
The Obama administration has publicly thrown its support behind a 50-state probe by states' attorneys general and has rejected calls for a nationwide moratorium on foreclosures, out of concern for the consequences it could have on the housing market.