Why The Mortgage Foreclosure “Robo-Signing” Scandal May Be Good News For Homeowners Facing Foreclosure

Large banks initiate mortgage foreclosure proceedings against tens of thousands of homeowners in Pennsylvania and New Jersey each month. To begin the foreclosure process, the bank must file a lawsuit against the homeowner in court. Until recently, a homeowner’s defense in mortgage foreclosure usually proved to be futile. Generally, by the end of the foreclosure process, the house is sold at a sheriff sale, the bank ends up with money to satisfy the outstanding debt, the attorneys get paid, and the homeowner is left without a home.

Recent media coverage has placed six New Jersey banks (some national banks) in the spotlight over allegations that the banks participated in robo-signing activities. Robo-signing is the automatic generation of entire documents. These banks allegedly directed their employees to sign stacks affidavits without actually examining any of the underlying robo-signed documentation that was automatically generated using the bank’s database.

If the allegations are found to be true, the banks and their attorneys potentially face civil and criminal liability, as well as harsh sanctions and fines—but that is not why I choose to post on this topic. Rather, these alleged robo-signing activities may allow many homeowners in mortgage foreclosure cases to mount a successful defense against the bank.

As discussed, robo-signed documents are generated by a computer based on the data within the bank’s system. It necessarily follows that, where the bank’s data is incomplete or erroneous, those inaccuracies are included in the robo-signed documents. Inaccuracies that went uncorrected because of the bank’s failure to review the documents before filing with the court may translate into deficiencies within the bank’s claim; many of which can be difficult or even impossible for the bank to overcome.

Now more than ever, if a homeowner is facing foreclosure, they should consult a knowledgeable attorney who handles mortgage foreclosure cases so that all of the relevant documents can be properly scrutinized.

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