Iowa Attorney General Tom Miller, has been cited as the major force in representing individuals and consumer advocates, fighting back against the robo-signing scandal that plagued the nation in the second half of 2010. At a December gathering in Des Moines, Miller stated "We will put people in jail", in regards to the lenders who fraudulently rushed foreclosure proceedings associated with the scandal. He recently announced that the investigation surrounding the bad mortgage lender practices are wrapping up and negotiations for settlement will kick off shortly.

At this point, no additional terms surrounding the negotiation have been released. Some ideas that were kicked around included jail time for the fraudsters, financial retribution to home owners who lost their home due to default and even requiring lenders to work with borrowers to keep their homes either by reducing the principal balance due or issuing mortgage modifications. At his most recent meeting, Miller indicated that releasing any specifics would be premature, however, he hoped and trusted that "... we're going to have a good agreement."

About The Robo-Signing Crisis

During the second quarter of 2010, it had come to light that several financial institutions mishandled the paperwork legally required of the foreclosure process. Mounds of paperwork erroneously rushed through the system by unskilled workers was unearthed and the documents in question missed the proper signatures required of the stages of foreclosure. Upon investigation, it was determined that the paperwork was not properly reviewed for accuracy prior to processing. As a result, thousands of home owners are thought to have lost their homes in error.

Bank of America, Ally Inc., Chase, Wells Fargo and U.S. Bancorp were all accused of the fraudulent procedure including improperly signing affidavits en masse and without a proper review as required by state law. As a result the lenders temporarily halted their foreclosure processes in October until a team of investigators researched the authenticity of the claims. Attorney generals for all 50 states joined forces with a crew of seven federal regulators to conduct the investigation. According to Miller this stage of the procedure is coming to an end and it is now up to the Justice Department, feds and banks to work out the settlement details.

Nation's Courts React to Robo-Signing Scandal

Slowly but surely, local court systems have started to hear cases in regards to the robo-scandal findings. If their current reactions have anything to do with settlement terms, the bankers will be severely punished. Some legal reactions already processed include:

• Virginia lawmakers are working on passing House Bill No. 1506. This legal change would require banks to maintain current and accurate records in regards to the foreclosure process in order to curb fraudulent activity from happening down the line.
• The Massachusetts Supreme Court ruled against both U.S. Bancorp and Wells Fargo in regards to the faulty documentation they used to illegally foreclose on two homes. Those proceedings on the properties have now been deemed invalid.
• New Jersey enacted an Emergency Foreclosure Law Amendment requiring that lenders must submit all legal documentation prior to proceeding with foreclosure activity. The state of New Jersey mandates a judicial foreclosure system.

Scandal Prompted Bill Veto

Prior to the scandal being exposed Alabama representative Robert Aderholt, (Republican) worked diligently getting the support needed to pass the Interstate Recognition of Notarizations Act. The bank-friendly bill was designed to ease restrictions on interstate commerce and allow for automation for foreclosure proceedings from state to state. Once the robo-signing scandal came to light, President Barack Obama vetoed the bill.

The White House acknowledged that the bill would have helped ease restrictions on interstate commerce. Consumer advocates were not for the potential law as it favored lenders, not consumers. If it was passed, the bill would have made it increasingly difficult for homeowners to fight fraudulent foreclosures.

If at all possible, Mortgage Marvel advises consumers to avoid foreclosure by any means necessary, because of all the additional complications the transaction may have on credit scores and credit histories. Some options include working with a lender to get the approval needed to implement a short sale. For those who can, a mortgage refinance can lower monthly payments and help avoid default. Another option to consider, is working with a lender to get mortgage forbearance or to get government financial aid.