‘Procedures Matter’ in Foreclosure; Do Outcomes Matter More?

Is it “just” a technicality if a mortgage servicer, foreclosing on a borrower who in all likelihood has defaulted, creates documents to prove the servicer’s client acquired the loan years ago?

Consider this (admittedly imperfect) analogy: is it just a technicality if a criminal wasn’t read his rights before being arrested? If we know such a person is guilty, it fair to say that such a person was “not harmed” by the police officer’s procedural misstep? Is it worse to violate his constitutional rights or let him back out on the street?

You can hear echoes of that age-old friction between due process and the messy, often infuriating results of honoring it, in reader reactions to American Banker’s recent story about servicers backdating paperwork to support foreclosures.

One reader, for example, took umbrage with a Bank of America spokeswoman’s comment that retroactive mortgage assignments are simply “procedural steps” to prove to a court that a trust has the right to foreclose on a borrower.

This commenter noted that Bank of America has, in at least one highly publicized instance, tried to foreclose on a home that had no mortgage at all, let alone one with B of A.

“Why should we assume that that they are correct when they allege that New Century wanted to assign a particular mortgage to Deutsche Bank as part of complex securitization deal executed 5 years ago?” this reader asked. “This is the danger of skipping those pesky ‘procedural steps’ long ago. I am sure they saved money by not carefully making and recording assignments at the time they were meant to occur. Unfortunately, it is not only the banks who are now paying for this. Homeowners with clouded titles are paying too. Procedures matter.”

You can check out the rest and make your comments here…

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