Robo Signing

     A federal task force is reported to be looking into whether mortgage companies may have committed fraud or violated other federal laws by falsifying documentation used in home foreclosures.  

      The Obama administration’s Financial Fraud Enforcement Task Force is said be investigating whether lenders may have violated mail or wire fraud statutes by submitting improper foreclosure documentation, the Washington Post is reporting. The task force is also looking into whether lenders misled federal agencies such as the FHA and VA in the process.   

     The investigation focuses on the practice of “robo-signing,” in which mortgage company representatives charged with preparing foreclosure paperwork are said to have routinely signed off on sworn affidavits without reading them, or submitted documents that had been improperly notarized. The investigation comes on the heels of an announcement last week that all 50 state attorneys general were cooperating on a joint investigation into whether lenders’ foreclosure documentation practices violated any state laws.  

     Foreclosures are typically a matter for state law, but the federal government’s role in financing and insuring mortgages through entities such as the FHA, VA, Fannie Mae and Freddie Mac could bring federal law into play as well.  

     The news comes shortly after two major lenders announced that they have renewed foreclosure proceedings after suspending them to investigate documentation concerns. Bank of America said Monday that it was moving ahead with 100,000 foreclosure actions after finding no major problems with its foreclosure procedures, and GMAC Mortgage said it has restarted foreclosure proceedings as well, but did not specify if it was an across-the-board or limited action.  

     Mortgage lenders have defended their foreclosure practices, generally insisting that their procedures have been materially sound. James Dimon, CEO of JP Morgan Chase which also suspended foreclosures last week pending an investigation, said that no homeowners have been improperly evicted by his bank.       

     However, being materially accurate may not be enough if federal and state investigators determine that shortcuts taken with foreclosure documentation still represent a breach of the law. In that event, any lenders who end up being implicated may still face legal sanctions and penalties, even if the foreclosures themselves eventually proceed as planned.   

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