“Robo-signer” problem unlikely to afford relief to Washington homeowners in foreclosure – despite big problems at GMAC and J.P. Morgan Chase bank.

[catagories: Washington bankruptcy attorney]

The Seattle Times reported on Sunday, October 3, 2010 (columnist Blythe Lawrence) and the New York Times reported on September 30, 2010 (columnist David Streitfeld) that J.P. Morgan Chase and GMAC were quietly halting or delaying foreclosures in up to 23 states which require "judicial foreclosures". Unfortunately, Washington is a state which allows non-judicial foreclosures, so it seems unlikely that Washington residents will receive the benefit of a postponed or stopped foreclosure because of "robo-signer" foreclosure procedural inconsistencies.

Just what is a "robo-signer"? Take the case of Jeffrey Stephan, 41, who was a modest to low paid employee at GMAC. From his cubicle in Pennsylvania, "robo-signer" Mr. Stephan signed off on as many 10,000 foreclosures per month. This is about one foreclosure per minute, assuming an eight hour work day. The problem is that Mr. Stephan’s signature indicated that the information in the legal foreclosure documents was accurate to teh best of his knowledge, and that he signed in the presence of a notary. The problem was, that didn’t always happen, according to depositions that Mr. Stephan gave in December and June for court cases involving families trying to keep their homes, reports Brady Dennis of The Washington Post. (See Sunday, October 3, 2010, Seattle Times article).

Mr. Dennis reports that "Stephan’s admission has cast into doubt thousands of mortgage-foreclosure filings. Ally Financial, the nation’s fourth-largest home lender and GMAC’s parent company, halted evictions in 23 states that mandate a court judgment before a lender can take possession of a property."

IDEAS FOR ACTION: I have seen a few court cases in bankruptcy court where hopeful individuals are trying to stall or stop a foreclosure by complaining that the foreclosing bank cannot produce copies of original notes or produce a "chain of assignments" showing the various transfers of ownership of the loans. These hopeful (but misguided) borrowers may successfully see a slight delay in the bankruptcy courts, but they should not hold their breath for a permanent injunction against foreclosure. Our local judges are not inclined to give anyone a free house. Remember, one of our local bankruptcy judges ran a foreclosure/garnishment/repossession law firm for many years and thus enjoyed bread buttered by the mortgage lenders for most of a long legal career; It is unlikely in my opinion that this judge will put up with such anti-foreclosure stall tactics for any appreciable length of time. No observation here is meant to disparage the judge or any judge for that matter, but to just point out a widley known fact in the reasonable exercise of first amendment freedoms. Most of the foreclosure stall tactics you might read about on the internet mostly originate from more distantly liberal jurisdictions; I doubt they are going to meet with much traction in this jurisdiction. However, this unlikely strategy of a permanent injunction against foreclosure is absolutely distinct and different from a perfectly allowable "lien strip" of a second mortgage. A "lien strip" which is fully permissible and legal under the bankruptcy code. In a lien strip, a Chapter 13 debtor may be able to completely write off his/her second mortgage and remove the lien from the property without having to pay one dime to the second mortgage holder.

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