Judges Scrutinize Mortgage Docs, Deny Foreclosures

The Wall Street Journal's Law Blog has an interesting article entitled, "Subprime Legal: Judges Scrutinize Mortgage Docs, Deny Foreclosures." The article addresses one of the most common problems in mortgage lending and more specifically in foreclosures: who owns the note? These notes are transferred around so much, there is a significant question as to who owns the note and as to whether the foreclosing party has the right to be foreclosing on the property. The article also addresses several other common problem with many of these foreclosures. The full text of the article follows:

It’s been about nine months since several federal judges in Ohio issued the
widely-read foreclosure dismissals that shined a light on sloppy paperwork
done by companies that specialize in handling foreclosures.

Since then, the WSJ reports tonight, other judges across the country have
caught on and are carefully scrutinizing mortgage documents filed as part of
foreclosures and dismissing cases based on mistakes they’re finding, which
borrowers might be able to exploit when facing foreclosure. (For another good
read on judges and lawyers working to staunch foreclosure, click here for a
recent NLJ story.)

Among the issues hitting snags among the judges, according to WSJ:

“Backdated” mortgage assignments: Assignments, documents that transfer ownership of the mortgage, are executed after the foreclosure process has begun but state that they are “effective as of” a date prior to the foreclosure action. Some judges are dismissing those cases, saying attempts to retroactively assign the mortgage aren’t valid.

Suspicious multiple hats: Employees for mortgage companies are signing affidavits stating
they are employees of one company, but other mortgage documents say they work at
another firm. In some cases, an employee claims to work for companies on both
sides of a transaction, prompting one skeptical judge to ask for that person’s
work history for the last three years.

Shared office space: In foreclosure filings, one judge has found that numerous mortgage-related companies, including units of Wall Street banks, all claim to share the same address: a suite of a West Palm Beach, Fla., building. “The Court ponders if Suite 100 is the size of
Madison Square Garden to house all of these financial behemoths or if there is a
more nefarious reason for this corporate togetherness,” the judge wrote in a
recent decision.

Brooklyn Crusader: The judge making Madison Square Garden references is Brooklyn’s own Arthur M. Schack (pictured) of Kings County Supreme Court, who has dismissed dozens of foreclosures sua sponte because of shoddy documents or suspicious patterns he notices in the filings. Schack, 63, a former counsel to the MLB Players Association who is known for peppering his rulings with pop culture references such as Bruce Willis movies, says barely any of the foreclosures he has denied eventually are completed.

In one of his foreclosure dismissals, Schack (Indiana, New York Law School) cited the film
“It’s a Wonderful Life” to make the point that homeowners now deal with “large
financial organizations, national and international in scope, motivated primarily by their interest in maximizing profit, and not necessarily by helping people.”

In an interview, Schack, a Brooklyn native, told WSJ: “Taking away someone’s home is a serious matter. I’m a neutral party and in reviewing papers filed with the court, I have to make sure they’re proper.”