Florida’s foreclosure process has become a “virtual morass” of fake documents and faulty practices by “mill” law firms spewing out unverified paperwork, Associate Florida Attorney General Patricia Conners told the Florida Senate Committee on Banking and Insurance Tuesday.
In a legislative update on the Attorney General’s investigation of the state’s foreclosure crisis, Conners stopped short of saying what newly elected Florida Attorney General Pam Bondi will do about the situation, which developed over the last three years before Bondi took office.
But, in prepared remarks to the committee, she outlined several possible solutions:
Require loan servicers “to get the paperwork right” before filing for foreclosures;
Create incentives for lenders and investors to modify mortgages rather than foreclose;
Streamline the short sale process; and
Have lenders and investors compensate title insurers for damages or losses due to faulty paperwork.
Conners’ comments echoed an Attorney General office report issued last week that indicates the problems include instances of false paperwork, fake signatures and improper certification by notaries. The report showed that investigators have documented cases of foreclosure processors swearing to the truth of thousands of documents that they have not verified and homes being foreclosed upon by a bank that did not hold the mortgage note.
To remedy those problems, individual court circuits are becoming active. Starting Jan. 1, Palm Beach County's chief judge has instructed banks to start attaching each mortgage payer's payment record to some foreclosure case documents to double-check the official papers that banks file with the courts.
Judges in New York and New Jersey, too, have become openly critical of lenders’ foreclosure methods, in some cases citing irregularities in Florida foreclosures as the reason. And lawyers nationwide are sorting out the ramifications of a Massachusetts Supreme Court ruling last week that invalidated two foreclosures in that state because the lenders could not prove they owned titles to the properties.
Conners described the Florida foreclosure process as “total disarray “in her update on the investigation. Florida’s foreclosure problems have gained national attention because, as Conners indicated, Florida’s foreclosures represent half of all the pending cases in the 23 states that use a judicial process to resolve foreclosures.
The update did not include any specific actions that the AG’s office has taken to resolve the problems.
Conners said the office’s investigation of foreclosure law firms began with the allegations of “robo-signing” -- in which employees routinely signed huge numbers of documents without verifying the information the documents contained. But those investigations have expanded into “other apparent irregularities.” She did not give any details or did not respond to questions after the hearing.
Conners said the AG’s office is working with the attorneys general in the other 49 states on ways to restore “integrity” to the foreclosure process and reportedly discussing a possible settlement with major lenders in Florida and elsewhere.A report on that effort is expect sometime this spring.
There are also ongoing investigations into the foreclosure process nationwide by the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Housing Administration and the Justice Department.