Perhaps it shouldn’t be a surprise that some of the major banks implicated in the mortgage lending crisis have now mismanaged the resulting torrent of foreclosures.
Some lenders have suspended foreclosures in Maine and 22 other states after courts found problems with the paperwork. In Maine, a judge found that a GMAC employee’s lack of attention to essential paperwork amounted to “bad faith.”
Employees have acknowledged signing thousands of documents a month to speed the foreclosure process along. These documents were apparently affidavits certifying that the paperwork was in order, but a closer look has found many errors.
As any home purchaser who has paid for a title search knows, mortgages are all about paperwork. It is shocking to learn that some banks have taken a casual attitude toward professional standards and the rights of debtors facing foreclosure. Besides the rights of the mortgagee, clear title to the property is at stake.
It is unlikely that the banks were not out to defraud anyone, but there appears to be no easy way out of this problem. Many who are facing foreclosure may find that eviction may not be so swift or inevitable. On the other hand, it is feared that the banking errors may greatly prolong the recovery of the housing market.
One focus of controversy in the finance reform bill was the creation of an office of consumer protection. This latest financial complication demonstrates the importance of such protection in a marketplace where the rights of individuals can be routinely violated by their creditors.
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