In what appears to be another torpedo in the servicer’s hull, a Florida Circuit Court Judge who handles more than a thousand foreclosure cases a month is questioning whether borrowers ever received the court papers advising them that their home is going to foreclosure.
Judge Jennifer Bailer, a seasoned judge with more than 17 years on the bench, is in the center of trying to unravel the foreclosure mess that started in her state. Initially questioning whether service was properly done back in May 2009, Judge Bailer is now wondering if process servicing companies lied on affidavits filed in court that acknowledge that the process servicer appropriately served the defaulted borrower with foreclosure papers. The legal requirement is that foreclosure cases are subject to dismissal where homeowners haven’t been served within four months of the commencement of the action. Therefore, failure to properly serve a defaulted borrower of a pending foreclosure could lead to a title dispute following the sale of the property after foreclosure. This could be one reason that Old Republic National Title Insurance recently announced that it would stop issuing title insurance on foreclosure properties of JP Morgan Chase and Ally Financial (see http://securitizedassetsurveillanceanalysis.blogspot.com/2010/10/and-hits-just-keep-on-coming-no-title.html)
Therefore, once again, the slipshod method in which foreclosure actions have been handled is calling into question the entire foreclosure process. This continuing downward spiral of the manner in which the process is done appears to again be based on the emphasis to reduce costs while volumizing production. By attempting to keep the cost of the process down, corners get cut. However, when those actions lead to violations in legal requirements, the consequences can be dramatic. Unlike the prior highlighted issue of “robo-signing”, the due process issue of this “sewer” service is much more problematic. Not providing the borrower with notice of the foreclosure is a significant failure in the required legal process. While this will still not require the return of the property to the defaulted borrower, it continues the question of just how poorly executed are the processes and procedures of the servicer, including the auditing of their outside service providers.
Like in “The Gang That Couldn’t Shoot Straight,” servicers and their service providers in the foreclosure industry are finding themselves at odds with each other while bumbling through the foreclosure mess. Can’t wait to see how the lion gets used here to blackmail “clients.”
It would be interesting to see how many of the servicers were highly rated by the rating agencies as servicers. In addition, it would be interesting to review the SAS 70's issued by the accounting firms for these servicers. If in both instances, the culprits(servicers) were rated highly by both the rating agencies and the accounting, does the fault stop at the servicer? Just thinking out loud.
ReplyDeleteKen - Very good point. As we have seen, the rating agencies were also part of this gang, having rated the original securitization structures as they did. And as far as the accountants, the financial gaming of the servicing is continuing. The auditing of the servicers as to their compliance with their requirements in the PSAs is in question. Let's not forget that almost every conduit has stopped following Reg AB at this point, having abandoned their shelf registrations. The legal liability of all these parties will make the pre-SOX era of corporate malfeasance look like a picnic.
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