Officials call on mortgage firms to temporarily stop foreclosures

Maryland's governor and attorney general and a Baltimore congressman jointly called Monday on mortgage companies to voluntarily halt foreclosures in the state until the firms can say for certain that they are following state law.

The officials were responding to widespread reports that executives with national companies have signed many legal documents for foreclosure cases without verifying that the information was accurate. Bank of America said Friday that it would delay foreclosures in 23 states as it investigated its process, following similar announcements by JPMorgan Chase and GMAC Mortgage. Maryland was not among the states.

Several states, including Massachusetts and Iowa, have launched investigations into documentation. Analysts have speculated that foreclosures could grind to a near halt in those 23 states — and possibly elsewhere — as lenders rush to determine whether they have been following rules.

Gov. Martin O'Malley, Attorney General Douglas F. Gansler and Rep. Elijah E. Cummings together sent letters to seven of Maryland's largest mortgage servicers late Monday, saying they were "seriously concerned" that firms might be violating state law. In Maryland, lenders' representatives must file affidavits stating the amount due and whether the borrower was considered for a loan modification, among other information.

"It is essential to ensure that these affidavits are not turned over to 'robo signers' for execution before, rather than after, a problem is discovered," the officials said in their letter. "Since there is no redemption period in Maryland after a foreclosure sale is ratified, a foreclosure results in permanent damage to Maryland families, making it critical that the accuracy of the foreclosure filing is verified prior to pursuing the action."

The three officials called on lenders to "re-examine" their foreclosure processes in Maryland and report to the state by Oct. 18 about how they will ensure their affidavits are accurate. The letter asks lenders not to start foreclosure proceedings, go to auction or evict any homeowners until the review is complete.

Shaun Adamec, a spokesman for O'Malley, said the governor was also looking into other options — including a temporary ban on foreclosures. Cummings sent a letter to O'Malley and Gansler over the weekend urging a moratorium for at least 60 days.

Lenders were trying to foreclose on more than 40,000 Maryland homes during the spring, the most recent figures from the Mortgage Bankers Association.

Scott C. Borison, a Frederick attorney who represents homeowners in foreclosure, said he has found frequent problems in legal paperwork and thinks a moratorium is a good idea.

"If you're going to take someone's house through foreclosure, you'd better have it all done correctly," he said.

Kathleen M. Murphy, chief executive of the Maryland Bankers Association, said that an outright ban had "constitutionality questions and eminent domain questions" but that she supported a voluntary approach.

"Our members are interested in doing the right thing in terms of foreclosure," she said. "The concern about an outright moratorium on foreclosure [is] it sweeps in those whose processes are following the procedures that are outlined."

Murphy added that Maryland's new law allowing homeowners to request foreclosure mediation gave borrowers a way to draw lenders' attention to documentation problems. "There's layers of protection we have under Maryland law," she said.

Andy Barth, a spokesman for Robert L. Ehrlich Jr., the Republican former governor of Maryland who is running against O'Malley, said that instead of telling mortgage servicers to halt proceedings, O'Malley should have "done more about providing good jobs" so residents didn't fall behind on their loans in the first place.

"Bob Ehrlich's priority is to create good jobs so people can pay their mortgages," Barth said.

Executives with Bank of America, Chase and GMAC have said in depositions that they each signed thousands of foreclosure affidavits a month without personally verifying the information in the documents.

Chase, which declined to comment Monday on the Maryland request, said earlier that it was delaying foreclosures in the 23 states where foreclosure requires a full-blown court case. Maryland is considered "quasi-judicial" when it comes to foreclosure, requiring filings with the court but not routine hearings.

Chase said in a statement that it was "systematically" re-examining documents and expected to complete the review in a few weeks.

"We believe the accuracy of the factual loan information contained in the affidavits was not affected by whether or not the signer had personal knowledge of the precise details," the company's statement said. "The affidavits were prepared by appropriate personnel with knowledge of the relevant facts based on their review of the company's books and records."

A spokeswoman for Ally Financial, GMAC Mortgage's parent, made the same point. Spokeswoman Gina Proia added that her firm believed its "procedural error" did not cause "any inappropriate foreclosures." She declined to comment on the Maryland request.

Bank of America did not return phone calls seeking comment.

John Rao, an attorney with the National Consumer Law Center, a Boston-based consumer advocacy group, said it is generally a state legislature that can enact a foreclosure moratorium. The court system also could impose a ban in some states, possibly including Maryland, he said.

Borison, the Frederick attorney who represents homeowners, said he had seen homes auctioned off in error. One client was making payments on a loan modification when her home was sold by the lender, he said. Another received a letter in August 2009 approving him for a modification to begin in October but was foreclosed upon in September.

Borison said he suspected foreclosure-service providers were working under timelines too tight to do enough due diligence.

"The whole idea that you just push the paper through and if nobody objects, you're golden, can really wreck our legal system," Borison said. "There's got to be some accountability for what people are filing."

Copyright © 2020, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad