Shady congressional procedures and a one-size-fits-all federal “solution” that’s guaranteed to generate a ferocious populist backlash? Why, it’s ObamaCare all over again!
Actually, I think people might be overreacting to this one. Here’s Reuters raising the alarm this morning:
A bill that homeowners advocates warn will make it more difficult to challenge improper foreclosure attempts by big mortgage processors is awaiting President Barack Obama’s signature after it quietly zoomed through the Senate last week.
The bill, passed without public debate in a way that even surprised its main sponsor, Republican Representative Robert Aderholt, requires courts to accept as valid document notarizations made out of state, making it harder to challenge the authenticity of foreclosure and other legal documents…
The bill’s approval involved invocation of a special procedure. Democratic Senator Robert Casey, shepherding last-minute legislation on behalf of the Senate leadership, had the bill taken away from the Senate Judiciary committee, which hadn’t acted on it.
The House passed the bill back in April, before the systemic problems with foreclosure documents became known. Aderholt’s been pushing it for years as a simple way to make life easier for court stenographers, but Pat Leahy and Jeff Sessions took a sudden curious interest in it in late September after news broke that Ally Financial would halt evictions in 23 states due to improperly executed paperwork. Turns out bank officers were rubber-stamping foreclosure documents churned out by the bank’s computers without personally reviewing the homeowner’s file to see if the foreclosure was justified. WaPo’s story of Sept. 23 describes the practice of “robo-signing”:
Ally Financial has not called off evictions in the other 27 states or the District of Columbia, none of which require a court order to initiate a foreclosure. And yet in those places, distressed borrowers, on the brink of losing their homes, are finding flawed and forged documents in their files and scrambling to challenge foreclosure proceedings.
Joan Cavanagh, who lives near Cape Cod, in Massachusetts, a state not included in Ally Financial’s moratorium, is scheduled to be kicked out of her home in 30 days. Her documents were signed by Jeffrey Stephan, the Ally document processor who admitted that he approved 10,000 foreclosures a month but never read the files to see whether the proceedings were justified.
Until Ally’s announcement this week, she said she did not understand why her documents had so many inconsistencies. Her file, for instance, was notarized after Stephan signed it, although the notary was supposed to witness the signing.
Aderholt’s bill passed the Senate by unanimous consent on Sept. 27 and went to The One’s desk for signature, where it languished until all hell broke loose online this morning. The fear, of course, is that Congress is trying to reduce the backlog of foreclosure proceedings and thereby save lots of time and legal expense by letting banks railroad homeowners with bogus affidavits. Or, as John Carney of CNBC puts it, “It could be a backdoor bailout of the liar foreclosure problems of big mortgage lenders”:
The fear is that the bill will allow banks to “forum shop,” pushing through notarized foreclosure statements from states with lose [sic] standards or courts unfriendly to challenges to notarized foreclosure statements. Proponents of the bill would probably argue that it will help avert a nation-wide slowdown to the foreclosure process that could serve simply to delay a housing recovery by leaving more houses in mortgage limbo.
In other words, less than a month before the midterms, with unemployment sky high and taxpayers set to vent their rage about the TARP bank bailout at the polls, the big congressional plan before November was … to make it easier for banks to throw struggling people out of their homes. Bad idea. So bad, in fact, that within a matter of mere hours after the story broke big, The One had vowed to let it die on his desk and thereby avoid the “unintended consequences” it might have for the mortgage industry. (Pat Leahy, who helped fast-track the bill for passage, now claims he supports Obama’s decision.)
Just one lingering question: Would the bill really have been some great boon to banks in pushing foreclosure proceedings through? I had the same reaction to it initially as this post at lefty site Firedoglake. The timing and sketchiness of Congress’s actions here are oh so suspicious, but all the bill says is that “lawful notarizations” from out of state (including ones signed electronically, which are allowed in about a dozen states according to Reuters) should be “recognized” to the same extent as lawful notarizations executed in state. Are the problematic documents described in the WaPo piece above “lawful”? Some were signed without the notary present, which isn’t supposed to happen, and all apparently include sworn statements that the signer had personally reviewed the homeowner’s case file, which turns out in many cases not to be true. A homeowner challenging an out-of-state affidavit on those grounds would presumably be able to bar it from court even on the bill’s own terms. As for the point about “forum shopping,” here’s where I need the lawyers among us to chime in: Do notarization standards vary so widely from state to state that it’d be in a bank’s interest to do all of its affidavits in state A and then ship them out to courts in states B, C, D, etc? And don’t personal jurisdiction requirements in foreclosure cases severely limit the banks’ ability to shop for friendlier courts? If so, how would this bill have made banks’ lives significantly easier, to the point where at least one site today was describing this bill as “TARP 2”?
If legislators really want to do something to give homeowners more leverage, they could consider requiring banks to get a court order for evictions. As WaPo noted last month, 27 states currently don’t do that, which means it’s up to the homeowner to sue the bank to challenge the eviction. Tough, costly stuff if you’re one of the millions currently out of work and enjoying the aftermath of “Recovery Summer.” Exit question: Are we sure the Senate rammed this bill through because they were looking to stealthily help out some banks? They don’t read bills as important as ObamaCare; how likely is it that they bothered with an innocuous-sounding little nothing about notarizations?