Florida, which has been Ground Zero of the foreclosure crisis as well as a hotbed of judicial abuses, ranging from the biggest and most active foreclosure mills to kangaroo courts known as “rocket dockets”, has taken a surprising step in the right direction. The state bar association has told foreclosure lawyers in no uncertain terms that they have a duty to report fraud to the court, and that supersedes their responsibilities to clients. And even more surprising, the duty is retroactive: lawyers are supposed to inform judges even if the home has already been sold!
This move will have the very salutary effect, if the new order were actually followed, of having judges know the extent of servicer abuses. And the side effect would be even greater skepticism on the behalf of judges (well at least those judges not bought and paid for by the banking industry). Even if lawyers complied in only, say, one-quarter of the abuses, the effect on servicer credibility, which has already taken a big hit, would be considerable.
I would love to have been a fly on the wall in the meeting in which the decision to take this move was made. I can only infer that one impetus is the fall from grace of the formerly influential foreclosure mills, like the Law Offices of David Stern. Another may have been concern by attorneys with conventional commercial and consumer practices about the damage that miscreant foreclosure lawyers were doing to the already not-all-that-hot reputation of their profession.
Note that the recommended procedure, a private hearing with the judge, was clearly a compromise and some, perhaps many, may not consider that to be a legitimate course of action. This is gonna be interesting….
From the Palm Beach Post (hat tip Lisa Epstein):
In an opinion that could have unfathomable consequences in countless foreclosure cases, The Florida Bar says attorneys must notify a judge about potential fraud — including robo-signed affidavits and forged notary stamps — even if a foreclosure case is closed and the home has been sold at auction…..
No one knows how many cases could be affected or what judges will do when they are notified…
“There has never been a problem like this before or this kind of wholesale misrepresentation,” said Margery Golant, a Boca Raton-based attorney who teaches a portion of the Bar’s four-hour online course, which instructs lawyers to report fraud. “No one knows how this is going to turn out or what the right things to do are.”
While attorneys are instructed to report fraud, they should not to do so in a public court hearing without their client’s permission. Instead, the banks’ attorneys should ask for a private hearing with the judge, said Cynthia Booth, an ethics attorney with the Bar.
“You try to cause the least amount of harm as possible to the client,” Booth said. When fraud is suspected, an attorney’s duty to the court supercedes the attorney’s duty to the client, Booth said. Private hearings would allow the attorney to fulfill both duties, she added.
But the thought of private hearings about widespread fraud in foreclosure cases has some lawyers bristling. Robo-signers have admitted in depositions that they signed off on hundreds of thousands of foreclosures and major lenders have already acknowledged that court documents were not properly verified, said foreclosure defense attorney Thomas Ice of Ice Legal in Royal Palm Beach
“This is a very public problem and to try and address it in a private way is not going serve the court in its attempt to assure everyone about the integrity of the court system,” Ice said.
St. Lucie Circuit Judge Burton Conner, another instructor, said he was not aware of the Bar’s recommendation about private hearings. Conner, also a member of the Florida Supreme Court’s Task Force on Residential Mortgage Foreclosures, said private hearings, called in-camera hearings, are appropriate in certain cases but very rare.
“I’m not sure if that’s an appropriate procedure,” Conner said. “This is a civil court, and it is open to the public.”
When an attorney asks for an in-camera hearing, the judge must hold a public hearing to decide if the private hearing is necessary. That means more time and more delays in processing foreclosure cases…
As far as getting guidance from the court, Blanc said a judge has a range of options when a breach of ethics is revealed, including doing nothing to throwing out a judgment. In pending foreclosure cases, the judge could halt the proceedings while the fraud is investigated.
However, the biggest and most troublesome problem is what to do with cases that ended years ago. Can judges undo these foreclosures, and what happens in cases in which the home was sold to new owners without a clear title? As for discipline, the judges must decide what to do with fraud brought to their attention. Should they refer the cases to the Bar for further investigation or to legal authorities for prosecution?