One by one state legal systems are starting to react to the fraudulent mortgage activity caused by lenders and their robo-signing procedures and borrowers are gaining the upper hand. During the autumn of 2010, it was discovered that private lenders were skipping some legal steps in regards to processing mortgages and as a result Attorney Generals from all 50 states joined to perform investigations into the system. Based on their efforts, some local courthouses are now hearing erroneous foreclosure cases while other states have enacted emergency amendments to prevent lenders from conducting any other illegal activity.
New Jersey Enacts Emergency Foreclosure Law Amendment
Garden State Chief Justice Stuart Rabner has demanded that lenders provide all legal documentation in regards to stave the robo-signing crisis within New Jersey. New Jersey mandates a judicial foreclosure system, defined as a "Type of foreclosure proceeding used in some mortgage states that is handled like a civil lawsuit and conducted entirely under the direction of a court" (Mortgage Marvel). Recently, the local courts authorized changes to the current system to better protect local homeowners.
New Jersey is known for having one of the highest mortgage delinquency rates in the nation (Lender Processing Services). In 2010 the local Supreme Court required plaintiffs including Bank of America and Ally Financial, to better defend their foreclosure processes. Local homeowners are now going to benefit from another level of protection against robo-signing procedures as the state has officially implemented an emergency foreclosure law amendment requiring lenders to better prove their cases. This process is currently only applying to uncontested foreclosures.
Bank's Lose in Massachusetts Supreme Court
Within Massachusetts, there are 200 years of law in regards to legally transferring mortgages and recently two foreclosure cases were deemed invalid as they did not clearly follow the proper legal steps. Justice Ralph Gants of the Massachusetts Supreme Court ruled against U.S. Bancorp and Wells Fargo as the documentation they presented to defend their foreclosure legality cases did not have the signatures needed. In turn, the foreclosure proceedings on two homes were deemed invalid.
Within the state, local law dictates that mortgage loans are equivalent to real property and physical signatures on documentation are necessary for legal title transfers. However, as a way to streamline the local processes banks skipped the required signature step (as common with many robo-signers) and in mortgages were quickly transferred from lender to lender and joined a pool of other mortgages minus the proper signatures. The documentation provided from banks that skipped the required signature steps has been deemed not legal. This ruling is the first step in what is expected to open the floodgates for consumer restitution and drawn out legal battles as the court has officially decreed that banks must prove they hold a loan before starting the stages of foreclosure.
Pennsylvania Halts Sheriff Foreclosure Sales
Foreclosures can be purchased both at real estate owned (REO) auctions and through sheriff sales that require that a sheriff to preside over the transaction. In Philadelphia, PA acting Sheriff Barbara Deele recently issued a decry halting sheriff foreclosure sales in the city of Brotherly Love for 50 days. While the moratorium will give a temporary reprieve to homeowners in default, the reason is to provide the new sheriff time to reorganize after a recent shake up.
The Philadelphia Sheriff's Department recently underwent an audit and was cited with financial mismanagement. As a result in a sweep of existing staff occurred, and Deele has implemented the moratorium to provide the new team with the time needed to adjust to their positions and ensure that all homes to be sold via sheriff auction were legally foreclosed upon in the first place.