Foreclosure Furor Rises; Many Call for a Freeze
By DAVID STREITFELD and GRETCHEN MORGENSON
Published: October 5, 2010
The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.
Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that “it is time that banks are held accountable for their practices.”
In a request for an investigation into questionable foreclosure practices by lenders, the lawmakers said that “the excuses we have heard from financial institutions are simply not credible.”
Officials from the federal agencies declined to comment.
Texas Attorney General Greg Abbott, a Republican, sent letters to 30 lenders demanding they stop foreclosures, evictions and the sale of foreclosed properties until they could provide assurances that they were proceeding legally.
Both developments indicated that scarcely two weeks after the country’s fourth-biggest lender, GMAC Mortgage, revealed that it was suspending all foreclosures in the 23 states where the process requires judicial approval, concerns about flawed foreclosures had mushroomed into a nationwide problem.
Some of the finger-pointing was also being directed back at Congress. The Ohio secretary of state, Jennifer Brunner, suggested in a telephone interview on Tuesday that a bill passed by Congress last week about notarizations could facilitate foreclosure fraud.
Dubious notary practices used by banks to justify foreclosures have come under scrutiny in recent weeks as GMAC and other top lenders suspended homeowner evictions over possible improper procedures.
Ms. Brunner, who has recently referred possible cases of notary fraud in her state to federal authorities, worries that the legislation would allow the lowest standard for notaries to become a nationwide practice. She said she also worried that the changes were coming in the middle of a foreclosure storm where people could lose their homes improperly.
“A notary’s signature is that of a trusted, impartial third party, whose notarization bolsters the integrity of the document,” Ms. Brunner said. “To take away the safeguards of notarization means foreclosure procedures could be more susceptible to fraud.”
As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed.
In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.
Notary practices vary from state to state and the bill, sponsored by Representative Robert B. Aderholt, a Republican from Alabama, would essentially require that one state’s rules be accepted by others. If one state allows its notaries to sign off on electronic signatures, for example, documents carrying such signatures and notarized by officials in that state would have to be recognized and accepted in any state or federal court.
Ms. Brunner pointed out that some states had adopted “electronic notarization” laws that ignored the requirement of a signer’s personal appearance before a notary. “Many of these policies for electronic notarization are driven by technology rather than by principle, and they are dangerous to consumers,” she said.
Mr. Aderholt had introduced the bill twice before and both times it passed the House of Representatives but not the Senate. Mr. Aderholt reintroduced the bill last October and it passed the Senate on Sept. 29. It is awaiting President Obama’s signature.
Mr. Aderholt’s press secretary, Darrell Jordan, said there was no connection between the timing of the bill and the current notarization problems with foreclosures. In a statement announcing the bill’s passage, Mr. Aderholt said: “This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state.”
If Obama signs this HR-3808, I will know for sure that he was in, and on it from the beginning.
This bill is so absurd that it is totally outrageous fraud, blatant disregards to expose the truth, and hangs us out to be slaughtered by these corrupt “bankers”, lender, and servicers, andn foreclosure mills…..
We need to bombard the white house with calls,email,letters…..
STOP THE MADNESS !!!!!
“This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state.”
I wonder why would one state refuse to “acknowledge the integrity” of a notary in another state? Oh yeah: because there is no integrity: because there’s fraudulent junk.
Great work Congress: answering evidence of fraud by eroding state’s rights and: helping the perpetrators advance the fraud.
President Obama — a public veto of this awful bill would make a great forum to let the country know your thoughts on this garbage.