According to the New York Times, an audit by San Francisco county officials of about 400 foreclosures “determined that almost all involved either legal violations or suspicious documentation. . . . The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership. . . . About 84 percent of the files contained what appear to be clear violations of law, it said, and fully two-thirds had at least four violations or irregularities.” The problem seems to be systemic, suggesting that judges should be able to modify mortgages on the basis of nullified contract.
The report came just after “the $26 billion settlement over foreclosure improprieties between five major banks and 49 state attorneys general.” As the San Francisco analysis points out, “the settlement does not resolve most of the issues this report identifies nor immunizes lenders and servicers from a host of potential liabilities.” Bankers have not been oblivious to the value of being protected, as banks require buyers to sign holding the institution harmless if questions arise about the validity of the foreclosure sale. In other words, the bankers have wanted to be able to rely on sanctity of contract even when they have violated the law of contract. Phil Ting, the San Francisco assessor-recorder, argues that the depth of the problem raises questions about whether at least some foreclosures should be considered void. “It is very apparent that the system is broken from many different vantage points.” For the banks to insist on sanctity of contract nonetheless should be rejected. The banks should be held accountable in spite of their signed forms of protection.
Source:
Gretchen Morgenson, “Audit Uncovers Extensive Flaws in Foreclosures,” The New York Times, February 16, 2012. http://www.nytimes.com/2012/02/16/business/california-audit-finds-broad-irregularities-in-foreclosures.html?_r=1&ref=todayspaper
Authored By The Worden Report
