Legality of Thousands of Mortgages Thrown Into Question

Robo-signing has been around a lot longer than originally thought, and could jeopardize the legality over the deeds of tens of thousands of homes dating back more than a decade ago, the Associated Press (AP) reports.

County officials across the country are finding mortgage paperwork that were improperly notarized or signed without proper review, dating as far back as 1998, the AP has found in its analysis.

For example, in Guilford County, N.C., about 74 percent of 6,100 mortgage documents filed since 2006 were found to have questionable signatures. 

"Because of these bad titles, property owners can't prove they own the properties they think they bought, and banks can't prove they had the right to sell them," Jeff Thigpen, the registrar of deeds in Guilford County, N.C., told the AP.

Since last fall, banks have faced investigations over “robo-signing” procedures, which consists of shortcuts of approving and reviewing mortgage paperwork and foreclosures. The “robo-signing” scandal has brought many foreclosures into question as home owners have challenged the validity of their mortgage documents. 

Mortgage documents with robo-signed signatures could throw into question the ownership of the properties, says Katherine Porter, a professor at University of California Irvine School of Law. 

Furthermore, if invalid documents are discovered in the chain of ownership, shoddy mortgage paperwork has the potential to delay the sale of a home or make it difficult for buyers to get a mortgage because title insurers won't write a policy for the property, says Justin Ailes, vice president of government affairs of the American Land Title Association. 

Source: “Widespread Robo-signing of Mortgage Documents Found as far Back as 1998 Could Haunt Owners,” Associated Press (Sept. 1, 2011)

Florida Legislature Trying to Bust Foreclosure Backlog - Again

For the third consecutive year, Florida lawmakers will attempt to fix the state's foreclosure court mire with legislation that streamlines the process and, in some cases, gives banks quicker access to repossession.

The proposed legislation, called the Florida Fair Foreclosure Act, has yet to be filed, but Rep. Kathleen Passidomo, R-Naples, is passing around a draft bill and seeking input.

She said she's received "hundreds and hundreds" of email responses to her request and is making revisions before filing it for consideration during the 2012 legislative session. Full Article

Backlog of Cases Gives a Reprieve on Foreclosures

Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places.

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.

“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.” Full Article

A Lawyer Under Investigation Shuts Down His Foreclosure Practice

NY Times

David J. Stern, one of the country’s best-known beneficiaries of the foreclosure boom, who pocketed millions from evictions processed by his Florida law firm, told regulators on Monday that he was shutting down his foreclosure practice.

Mr. Stern’s law firm in Plantation, Fla., will end its involvement in all pending foreclosures at the end of the month, according to a filing with the Securities and Exchange Commission.

A lawyer who enjoyed a lifestyle of mansions and flashy sports cars and owned a yacht called Misunderstood, Mr. Stern and his law firm have been at the center of an investigation by the Florida attorney general’s office into whether numerous law firms falsified documents to speed up foreclosures.

Mr. Stern’s lawyer, Jeffrey Tew, said he would not comment beyond what was in the S.E.C. filing.

At its peak in 2009, the Stern law firm handled 70,000 foreclosures, or about 20 percent of such actions in the state, bringing in $260 million in revenue.

But after the announcement of the investigations, Mr. Stern’s law firm lost its biggest clients, including Citibank and the mortgage lending giant Fannie Mae. Its executives left, and the company laid off most employees.

The law firm’s primary client was DJSP Enterprises, a publicly traded company that acquired the back-office operations of the David J. Stern law firm in early 2010. The plan was to replicate the law firm’s foreclosure business model in several states as millions of people across the country continued to lose their homes.

The public offering netted Mr. Stern $60 million, but it appears to have been a money loser for other investors. Shares of DJSP Enterprises, which traded as high as $14 last summer, traded at 14 cents Monday on Nasdaq.

One of those investors, Kerry Propper, who runs a boutique investment bank on Wall Street, did not respond to an e-mail seeking comment.



Ben-Ezra & Katz Lays Off 236

Fort Lauderdale law firm Ben-Ezra & Katz confirmed Tuesday that it had laid off 236 employees on Monday.

The layoffs come after Fannie Mae terminated its relationship with firm, which requires Ben-Ezra & Katz to transfer its files to other attorneys. The firm advertises itself as a full-service real estate firm focused on Florida foreclosures.

Last week, the firm said in a news release that it was “surprised” by Fannie Mae’s action, “since the issues leading to their action are things we discovered internally, then proactively informed Fannie Mae and created a plan to correct the problems.”

The firm said the problems were “technical paperwork issues” and had to do with whether the correct original affidavits were attached to each file.

This is the second Broward County law firm to lay off hundreds of employees after the mortgage giant stopped doing business with it. In November, Fannie Mae stopped working with David J. Stern’s Plantation law firm, which also is under investigation by the Florida Attorney General’s Office for so-called robo-signing.

A spokesman for Ben-Ezra & Katz said Tuesday that the firm is not part of that investigation.

Read more: Ben-Ezra & Katz lays off 236 | South Florida Business Journal