Florida Court Case Finds Robo Signing Not Enough to Stop Foreclosure

We’re a little puzzled at the attention a Florida robo-signing case has garnered. A plaintiff tried arguing that robo signing alone constituted a reason to dismiss a foreclosure. That’s such a stretch that it is no wonder a judge decided against the borrower argument.

Mind you, we think robo signing is serious because it is a fraud on the court and will almost assuredly be more complicated to clean up than the banks would have you believe. But the presence of a robo signer in and of itself is very unlikely to do much for the cause for an individual homeowner. The real implications are twofold. First is that the cost and hassle of banks straightening out this mess are serious. Not only will they have to spend more on foreclosures going forward, not merely getting proper signatures and notarizations, but also verfying the accuracy of the underlying information. And the state of Ohio is on a warpath, seeking to impose $25,000 fines for each improper affidavit. Second, some judges may make servicers start cases from scratch where a false affidavit has been submitted.
When banks find errors, as Bank of America has, what will the judge do?

HousingWire gives a report on this Florida case:

In Freemon v. Deutsche Bank, Florida’s Fourth District Court of Appeal ruled that an allegedly faulty affidavit didn’t constitute fraud in the case.

“Freemon’s motion does not demonstrate fraud or show why any of the alleged facts would entitle her to relief sufficient to set aside a default judgment,” the court ruled this week. “Freemon nowhere contends that she did not default on her mortgage, nor does she allege that the amounts due and owing, set forth in the affidavit and incorporated in the final judgment, are incorrect.”

In November 2007, Deutsche Bank filed to foreclosure against the homeowner, Veldrin Freemon, alleging she owed more than $570,000 on the mortgage note. Freemon didn’t answer the foreclosure complaint and a default judgment was entered. She later contested the case and it was delayed for six months. A foreclosure sale was reset for September 2009, and the property was sold back to the bank. When the bank sought to repossess the home after the sale, however, Freemon filed for relief from the judgment, alleging that an affidavit in the case was fraudulent.

The allegation of fraud was based on a deposition in another foreclosure case from a Litton Loan employee who was signing foreclosure affidavits without personal knowledge of their contents.

The court ruled that the deposition was insufficient to prove fraud and disagreed with Freemon’s characterization of the Litton Loan affidavit from Denise Bailey.

Freemon claimed that Bailey claimed personal knowledge of the matters in the affidavit yet she did not know who inputted information into the computer regarding the loan in question.

I pinged a lawyer who has been following securitization cases. HIs reply:

Very narrow ruling with limited implications.

I haven’t reviewed the case, but it doesn’t look like this borrower was connected to any of the people we know because it was a very incomplete argument.

Facts (as far as I can tell from the article):
Borrower was foreclosed. Later learns about robo-signers, and uses deposition from another case to argue the foreclosure should be overturned because the robo-signer admitted in the other case that she didn’t personally verify facts in the affidavit.

Appeals court dismissed borrowers complaint because the borrower didn’t present sufficient evidence of fraud or that any facts reviewed by the court in the original foreclosure case were in dispute. The borrower didn’t present any specific information regarding fraud in her case.

I did not see this as a ruling that robo-signing was not fraud. Rather, the judge said that the allegations about another case’s deposition were insufficient to show that an existing ruling (the house was already foreclosed and sold) should be vacated. The appeals court ruled that they would not over rule a trial court’s review of the facts without compelling evidence, which was not presented in this case.

I find the perspective of the article’s author and of Paul Jackson to be curious. The author said it was “good news for servicers” and Jackson said it was “huge news” because it found “robo-signing” was not fraud.

It seems very odd to me to be cheerleading for servicers’ right to submit bad information to the courts. That is a measure of just how far banks, and their minions, are willing to twist themselves over this issue.

In addition, this is far from a huge ruling. The borrower seems to have made a very weak case – first they didn’t challenge the foreclosure until after it was sold. Then, they only presented evidence from another case, without making any factual assertions in their own case (perhaps the goal was to re-open the case so they could take their own depositions, but this is a far more difficult route to attempt). In addition, they also tried to assert that the issue was “fraud”, which is, as you know, a very tough legal hurdle which requires the proof of “intent” which is difficult to establish.

While we’ll be seeing more fallout of the robo signing scandal, it’s more a symptom of deeper problems in the securitization process, namely, widespread disregard for contracts and legal procedures, than a huge issue in and of itself. But it will still be generating embarrassing stories for weeks and higher costs on an onging basis.

Update: Paul Jackson sent us this e-mail the day after the post ran:

I was directed to your blog tonight by a number of people, in re: HW’s coverage of a ruling out of Florida and robo-signing. In a post, you took the liberty of posting anonymous comments about our coverage from an attorney, ostensibly a debtor’s counsel given the tenor of the remarks — some of said comments therein involved mentions of not only HW’s coverage but of myself personally.

We’ve corresponded in the past, and I’ve always found you extremely reasonable. Had you asked me, I’d have been happy to explain my viewpoints, rather than seeing a hanging chad left out there that improperly characterizes both me and/or the media platform I own as a “minion” of the banks, willing to “twist” an issue. (If I’m a minion of anything, it’s protecting the rights of note holders, as I see that as fundamental to individual property rights — but doing so requires recognizing the sanctity of the law and legal process, and taking strong action to protect it if abused.)

I can’t speak for the reporter/editor on the story in question, but I can give you some context and a bit of my own viewpoints relevant to my own remarks (which were only on my personal Twitter feed, not HW’s).

HW reported that the ruling was “good news” for servicers, as noted. This isn’t “curious,” nor is it inherently “cheerleading for servicers’ right to submit bad information to the courts,” as your source improperly alleges. It’s a fact, albeit apparently an unpopular one in some quarters. I find it curious that your source was so quick to dismiss the ruling as irrelevant and question our analysis, yet this source also admitted to not having read the court’s opinion before being so willing to pass judgment on the same.

I’ve read the full opinion from the court, and have copied it below for you (below my signature), in the event you do wish to read it. The court’s opinion, while clearly narrow in scope, especially given the facts in the case — as HW’s editorial staff took NUMEROUS pains to note in our coverage — also makes it equally clear that the court does not see robo-signing in and of itself as a reason to vacate a prior foreclosure.

I took the liberty of calling the ruling “huge” on my personal Twitter account, as your anon source mentions. But that comment has nothing to do with servicers, as your source improperly alleges, and everything to do with borrowers — who can now rest easy if they bought an REO in Florida. The appeals court here said that a motion to vacate for fraud has to be specific, and that the fraud “alleged must affect the outcome of the case and not merely be ‘de minimis.'” In this regard, the ruling is “huge” in that it should help give the many millions of currently unsettled REO homebuyers some comfort that they do, in fact, own the homes they purchased.

Just wanted to clarify with you, as I felt your sources remarks not only grossly misrepresented my own viewpoints, but also improperly and unfairly sought to belittle HW in general. Thanks for your time.

I find Jackson’s comments surprising and puzzling for several reasons:

1. He takes considerable umbrage at what was mild, and in my opinion, deserved criticism. If you contrast the tone of the comment that bothered him, MBSGuy’s deeming Jacskon’s stance to be “curious”, it’s pale in comparison to the sort of shreds of articles that are a Naked Capitalism staple. Housing Wire has taken to presenting the mortgage securitization industry point of view, too often uncritically.

I have observed that Jackson on the issue of servicer/trustee abuses and probable fraud has been consistently carrying the industry’s water, touting astonishingly weak bits of positive news as major developments (the worst in this vein was a news “story” based solely on a reading from a lawyer who provided some sort of view via Gershon Lerman. That means by definition it’s a non-partner, who knows how qualified, presumably passed to HW by a hedgie. I was really shocked when I saw that on his site).

To put it more simply, while I’ve generally regarded HW as a very valuable site, it’s coverage on the beat I’ve been following clearly has a strong pro-industry bias. Given that Housing Wire presents itself as a journalistic outlet, that’s a meaningful shortcoming.

2. Jackson also is miffed that I did not review the post with him in advance. That’s not reasonable. Once someone publishes a piece, it is fair game for scrutiny, which in this case includes critical scrutiny. In my entire history of blogging, I’ve never given someone the opportunity to review a critical piece in advance. And I did issue a correction (and a rather abject one at that) the one time when I was off base.

3. I adhere to the Felix Salmon view of the blogosphere, that it’s fair game for blogs to argue points of view among each other, occasionally in a no-holds-barred manner. Jackson considers HousingWire to be a news outlet, but I don’t see how this changes the rules of engagement.

4. More narrowly, Jackson’s defense of the post in question is disingenuous. The post does NOT focus on REO sales per se and does talk about servicers. As important, the REO issue was never in dispute. REO sales are final, the remedy (if a borrower were to prove wrongful foreclosure) is not to take the house back, but to sue for damages, presumably against the trust or the servicer. I’ve discussed this, as has Bob Lawless of Credit Slips. Does Jackson really not understand the law here, or is he merely trying to pull a fast one?

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  1. tomk

    “but it doesn’t look like this borrower was connected to any of the people we know because it was a very incomplete argument.”

    Maybe the banks are behind this. Push a sure to lose case to get a propaganda victory and a precedent for other judges to exploit in their efforts to help the banks.

    1. nowhereman

      Funny, that’s the same thought I had while reading the article. These guys are so dishonest that I would not put it past them to manipulate the courts in this fashion.

      1. karen1p

        The banks have put out “sham” foreclosure defense attorneys. There is one out of Florida and he has a “nationwide defense” team supposedly put together. He uses local counsel who know nothing….and then they don’t file correctly and the homeowner is caught with no options. Talk about their claws getting everywhere. It’s disgusting. How did Taibbi classify them….as squid? That puts squid to shame. I classify them as the “undead.” Only way you can kill them is with a wooden stake to the heart. Remember to wear your wreath of garlic!

  2. Estoppel

    The borrower has made a weak case. She can still sue effectively. It also appears that Ohio is a bit different then Florida. To assume that their isn’t politics in these decisions and that the law is about fairness, is naive. Also, as anyone who is going or has gone through these foreclosures, only occassionally is the press is on the side of the lil’guys, and this only after years of attrition. Taibbi colorfully details how a poorly informed judge/crumudgeon is tossing people out of their houses in Florida. Why is it so difficult to hold public officials accountable for this shit? (The worst type of people seem to rise to positions of power.)
    Also in Florida was Stern’s criminal enterprise, creating immense damage prior to being reigned in. Anyone who has the balls to take on the Banksters needs hero status, only then can political and social pressure be brought against the parasites. Finally, before all of the “bad paperwork” issues cames to light, judges usually didn’t give a fuck about fraudulent affadavits, usually considering them mere technicalities. Perhaps the housing crisis will shine a brighter light on some of the kangaroo aspects of judicial processes.

    1. tz

      I’m learning new terms like estoppel and laches.

      The problem also seems that she didn’t respond so the default judgment was entered. Reversing things tend to have a much higher bar than the original contest. I suspect it would have been very different if she fought the original foreclosure (apparently she didn’t say she was not served the subpoena – which might have worked; the robo-servers are a worse problem because they attest to having served the foreclosure notice and just toss them).

      1. Fred Garnishment

        Fair enough – but she might not know what words like estoppel mean either. What’s the expectation now? The average borrower/deadbeat must be an expert in judicial science and thoroughly understand the litigation process? Is this guy going pro se?
        The courts aren’t respecting the legal rights (due process) that are owed to these people in foreclosure cases. This is well known, and it’s horrifying.

        1. karen1p

          The average borrower—-the average borrower defaults, walks away, gives up and let’s the banks win.

          The alleged borrower who is fighting these bastards has been researching for the last three years, knows more than most real estate attorneys, has given up their life to save their home. I wouldn’t classify that as the average homeowner. And still we are up against the wall. The one’s that win are GAGGED by the bank so that no one knows that winning is possible. There are very few victories in this game.

  3. attempter

    I find the perspective of the article’s author and of Paul Jackson to be curious. The author said it was “good news for servicers” and Jackson said it was “huge news” because it found “robo-signing” was not fraud.

    It seems very odd to me to be cheerleading for servicers’ right to submit bad information to the courts. That is a measure of just how far banks, and their minions, are willing to twist themselves over this issue.

    But as that demonstrates, whatever the ruling really “is”, this is how it’s going to be spun.

    The target audience are the people, corrupt lawmakers trying to figure out how to “legalize” all this (“but the courts are already saying it’s not fraud, so what’s wrong with retroactively enshrining that in law?”), even other judges. (As we’ve seen, Florida judges especially don’t seem to need much encouragement.)

    1. R Foreman

      ..not just bad information.. forged documents.

      Hey, I’ve got this document here saying I own your house! It has your signature on it, and also the signature of a bank vice-president. You have 15 days to vacate so the house may be resold. You do wish to respect property rights, do you not ?

  4. Jim the Skeptic

    There is no need for borrowers to be rewarded for failure. There is a need to punish abusers of the legal system.

    We are descending into lawlessness. Judges don’t have to wink at illegalities to encourage more lawlessness, they just have to permit it in their court rooms.

    The Ohio Attorney General should be roundly applauded for going after the banksters who have lied under oath to a court. The fines are not high enough!

    In 1792 when Kentucky became a state it passes it first tax laws. Taxpayers were required to provide their property information to the local tax commissioner. Failure to report all property left the taxpayer subject to TREBLE tax and additional fees to the county court and sheriff. As a result, those tax lists are rather complete.

    Bankrupt the business that lies in court and others will become very careful to obey the law.

    1. R Foreman

      We rewarded the bank failures (with $Trillions of dollars).. why not reward borrowers who fail to meet their obligation.. just sayin, there’s precedent.

  5. Dr Doom

    Why not go after judges who are winking at fraud? Sounds a bit grandiose, but there’s precedent for that too.

  6. MinnItMan

    One problem perhaps, is that fraud by a partyy is only an effective means for vacating a judgment for one year:

    “RULE 1.540


    (b) Mistakes; Inadvertence; Excusable Neglect; Newly Discovered Evidence; Fraud; etc. On motion and upon such terms as are just, the court may relieve a party or a party’s legal representative from a final judgment, decree, order, or proceeding for the following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial or rehearing; (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party;


    The motion shall be filed within a reasonable time, and for reasons (1), (2), and (3) not more than 1 year after the judgment, decree, order, or proceeding was entered or taken. A motion under this subdivision does not affect the finality of a judgment or decree or suspend its operation.” (end quote of rule – ****’s are omitted text)

    This is pretty important. Although the Florida Rules seem archaic to me, they do largely share the applicable provisions with which I am familiar in this area.

    Lack of particularity (tying a robo-signer to this particular action with a deposition done in this case, e.g) may be the basis in this case, but the larger issue will be that, even with obvious fraud, the one year limit will preclude a lot of cases. My take is that the courts would rather not base a ruling on an arguably harsh rule if they have the alternative of making the “you presented your case defectively” argument.

    Haven’t read the decision, though, but it still not a DIY area, IMHO.

  7. MinnItMan

    I would add that vacating a judgment starts in district court, and this is an appellate decision. An appeal would focus on the denial of a motion to vacate by the district court. It’s hard to believe that this wasn’t done as a DIY appeal, neglecting the district court stage and its process, given that this issue only came to light, maybe 6 months ago. To get something ruled on that quickly suggests to me that the rule cited above was not followed, and thus didn’t even come into play in a usable way.

    Appeals are extraodinarily tricky, and not having the proper process in place in setting up the appeal is usually fatal for the party appealing.

  8. Michel Delving

    “The most recent alarming development in the foreclosure process that has caught public attention involves improper activities by mortgage servicers. But let’s remember that, for years, housing counselors and advocates nationwide have documented patterns of fraudulent and abusive mortgage servicing practices. Current attention is focused on so-called “robo-signers,” individuals who appear to have attested to the validity of documents in a number of foreclosure filings so large as to suggest that something may be amiss in the recording process. This development is troubling on its own, but it also shines a harsh spotlight on other longstanding procedural flaws in mortgage servicing.

    Many may view these procedural flaws as trivial, technical, or inconsequential, but I consider them to be part of a deeper, systemic problem and am gravely concerned.”

    Federal Reserve Governor Sarah Bloom Raskin
    At the National Consumer Law Center’s Consumer Rights Litigation Conference, Boston, Massachusetts
    November 12, 2010
    Problems in the Mortgage Servicing Industry

    For Full Text: http://www.federalreserve.gov/newsevents/speech/raskin20101112a.htm

  9. Rodger Malcolm Mitchell

    “. . . it’s more a symptom of deeper problems in the securitization process, namely, widespread disregard for contracts and legal procedures, than a huge issue in and of itself.”

    So there you have it. “Widespread disregard for contracts and legal procedures” is not an “huge issue.”

    This is what the law has become in America.

    Rodger Malcolm Mitchell

    1. R Foreman

      Hi Chris.. willingness to forge documents and submit them to the court indicates some kind of desperation yes ? That’s a serious criminal act. I can’t wait to find out the real reason they’re doing it, although I’m almost afraid it might coincide with the dissolution of our monetary system and/or the government itself.. the cover-ups and denial are just so pervasive and widespread.. there has to be something horrible they’re hiding.

  10. kravitz

    Bloomberg, doing a pr spin on the robo issue…

    “The largest and most complex harm that may exist with the loans in default or foreclosure today is that the paperwork for the loans was not transferred correctly,” Porter said. “I emphasize that what constitutes a correct transfer is a gray area; we need more direction from courts and legislatures on this subject.”

    No Coffee Break for This Robo-Signer as Computer Stamps Mortgage Documents

  11. Jake Jackson

    Interesting case. One way or the other, the banks will blow right by this obstacle. This country is ruled from top to bottom by high finance. They ALWAYS get what they want.

  12. b

    Funny. Nobody even brings up the fact that this was a $570K loan on a personal residence that the borrower lived in rent free for almost three years.

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