Bank of America Latest to use Robosigners

A judicial foreclosure -- mandatory in 23 states -- is one of two options available to lenders in California.  Most lenders pursue non-judicial foreclosure.  It is, typically, a faster process and does not subject the property sold to the possibility of the original owner buying it back for an extended period of time.  Because of these facts, the price a bank can get for a non-judicial foreclosure is usually higher than the price it might get through a judicial foreclosure.

Nevertheless, judicial foreclosure laws exist to protect those who hold mortgages.  Under the law, a lender is supposed to carefully review the facts of a given foreclosure and have an employee sign an affidavit that all of the information is true and correct.  We have learned in the last several weeks that the banks and servicing companies, overwhelmed by the volume of foreclosures, have "robo-signers" doing this work.  This name indicates that the employees did nothing but sign foreclosure affidavits.  There is no possibility the signatory actually reviewed the documents.  Many robo-signers "reviewed" and signed thousands of foreclosure affidavits each month.

Bank of America is the latest lender now admitting that it had mid-level employees sign the affidavits without reviewing the information.  For the Bank of America employee in question to have reviewed each affidavit, she would have had to digest all of the information in a large file in approximately 70 seconds.

In defense of the banks, we have heard a great deal of information on the news about the fact that the lenders are overwhelmed with foreclosures.  The New York Times reported today that 2 million households are in foreclosure and 2.37 million households are on the precipice.

What is the effect of these violations of the law?  Bank of America, like Chase and GMAC, have suspended foreclosure proceedings until they can re-review those files.  The outcome might be the same for almost all property owners who are subject to foreclosure by these banks.  But the process could take up to five months to complete.  In the meantime, foreclosure efforts are in abeyance.

Regardless of the volume of work, when taking someone's home in a foreclosure, one would hope the banks would follow the letter and the spirit of the law.