One of the common complaints from banks that the concerns raised by borrowers over robosigning are mere “paperwork” problems, that everyone who is foreclosed on deserved it, and no one was really hurt. That is patently false, as there have been an embarrassing number of instances where someone with no mortgage was foreclosed on, as well all too many cases of servicer-driven foreclosures. And that’s before we get to damage to property records.
Attorney Timothy Fong called our attention to a below the radar form of chicanery that is predictable when you have nonjudicial foreclosure with no significant oversight and agents who lack incentives to do a good job. To some translate of the account below, MFRS = Motion for Relief of Stay. Even though a bankruptcy is supposed to hold all creditors at bay until the court sorts out what to do (which in a Chapter 13 is to develop a payment plan), servicers typically harass the borrower by filing Motions for Relief of Stay, which is a fancy of saying, “I want the house now.” If the borrower has hired a competent BK attorney, he can beat it back (although this still wastes the borrower’s by definition scarce funds). But a lot of people hire friends or family that are not BK savvy, and the banks hope to trip them up (either by not responding to the filing, or by signing a document in which the servicer agrees not to file future Motions for Relief of Stay, but which includes some innocuous looking but hugely detrimental provisions).
You need to read the part I boldfaced to see how widespread this sort of bankruptcy hijacking has become. And notice further how this works: the fraudsters pretend a person in bankruptcy owns a property that isn’t his. Not only does the financially stressed borrower have to incur costs to clear this up, but he also is at risk of being construed to be a participant in the scheme. From a recent post in Los Angeles Bankruptcy Law Monitor.
The mechanics of the hijacking and why we as Debtors’ Counsel are burdened with this plague:
1. a random deed is downloaded from the county recorder’s database (through access to a title company or a service like Dataquick).
2. The original information on the deed is photoshopped out, and the fraudulent information is photosshopped in—leaving the original county recorder’s filing imprint, and the notary stamp.
3. This is then presented to the foreclosure trustee as evidence to stop the sale.
4. Where the fault lies is that neither the Lender, nor the Title Officer of the title company guaranteeing the trustee’s sale does what he/she/it ought to do.
5. What the Bank/T.O. OUGHT to do is take the instrument number of the deed and look it up. This is very easy to do with either the Ticor or the other major database. Then it would be easy to determine if the document was genuine. And if the document was not genuine, reject the deed and complete the foreclosure.
6. Instead, the Bank/T.O. just ASSUMES the correctness of the false deed and then contacts Debtor’s Counsel; now this pile of “doo doo” becomes the Debtor’s Counsel’s problem, and must almost be handled unpaid.
7. Compounding the crime, Counsel for the Lender, often files its MFRS with the false deed, a patent violation of Rule 9011. Even after being advised by Debtor’s Counsel with evidence that the false deed is in fact patently false.
8. So the bankruptcy system is burdened by (1) the laziness and/or cowardice of the lender and/or title company, not to mention their counsel who file these baseless MFRS documents.
9. In fact, counsel for one lender admitted that 30% of the deeds used as a basis for these MFRSs were fraudulent.
So get this: the procedures are so bad that totally bogus documents can be created and slipped into the bankruptcy of an innocent victim to stop foreclosure sales. Even worse, the servicer, who OUGHT to know better, treats this person in BK who suddenly materialized out of nowhere from his perspective as a real owner and hits him with a motion for relief of stay so they can take a house from him that he never owned. And the foreclosure mill lawyers don’t question this because more motions of relief of stay means more fees.
If this example wasn’t such a serious indictment of our system, it would serve as a black comedy in bureaucratic incompetence.