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Anti-Robo-Signing Strictures Adopted For N.J. Residential Foreclosures

December 21, 2010 Leave a comment

Anti-Robo-Signing Strictures Adopted For N.J. Residential Foreclosures

By David Gialanella

New Jersey Law Journal

December 20, 2010

The state judiciary on Monday announced a set of measures in reaction to the “robo-signing” scandal in residential mortgage foreclosures.

Based on documented accounts of lending institutions rubber-stamping foreclosure paperwork, the court entered an administrative order directing lenders to show that there are no irregularities in their review processes.

The Supreme Court also adopted emergent rule changes that put the onus on lenders’ attorneys to police their clients’ practices. An attorney representing a foreclosing lender must now file an affidavit or certification confirming the attorney has communicated with a lender’s employees who confirmed the accuracy of the documents; to submit the names of those employees; and to file an affidavit or certification confirming that the filings comply with Rule 1:4-8(a), which mandates that attorney-filed papers have evidentiary support.

 

In a teleconference with reporters on Monday, Chief Justice Stuart Rabner said the additional obligations imposed on attorneys are consistent with existing foreclosure practice. “I would expect that attorneys will be able to comply with this,” he said.

Rabner said he took this action after reviewing a Nov. 4 report by Legal Services of New Jersey and a Nov. 16 report by a congressional oversight panel. Both found that lenders have been signing off on documents in support of foreclosure requests that they haven’t verified, a problem precipitated by lenders’ employees asked to sign stacks of affidavits without looking at the underlying papers.

In the administrative order, Acting Administrative Director of the Courts Glenn Grant singles out six of the state’s most prominent mortgage lenders as allegedly participating in robo-signing activities: Bank of America, JPMorgan Chase, Citi Residential, Ally Financial, OneWest Bank and Wells Fargo.

Grant listed specific instances of suspect verification practices by employees of those six lenders, including:

• A JPMorgan Chase employee whose eight-person team executed about 18,000 affidavits per month, none of which she reviewed before signing.

• A Citi employee who signed documents without review, had no industry experience and “could not even explain what precisely an assignment of mortgage accomplishes.”

• A OneWest Bank employee who executed 750 documents per week, spending no more than thirty seconds to examine each one.

• A Wells Fargo manager who signed 300 to 500 documents over a two-hour period each day. Managers who held her position were authorized to sign as “vice president of loan documentation” for purposes of executing the documents, but weren’t company officers in any other respect.

Grant also directed 24 other lenders, which each filed 200 or more New Jersey residential foreclosure actions in 2010, to demonstrate within 45 days that their foreclosure processes contain no irregularities.

A third prong of the judiciary’s plan, issued by Mercer County General Equity Judge Mary Jacobson ordered that the six lenders show why their processing of New Jersey foreclosure matters should not be suspended as a result of their implication in the robo-signing practices.

Those companies were ordered to make submissions by Jan. 19, when Jacobson will hold a hearing. As head of the Administrative Office of the Courts’ Office of Foreclosure, Jacobson is responsible for reviewing all foreclosure complaints.

Retired Union County Superior Court Assignment Judge Walter Barisonek was recalled on Monday to serve as a special master in charge of receiving the lenders’ submissions explaining their processes, beginning on Jan. 3. Barisonek will review those submissions, request testimony or other additional information, and decide whether to refer any of the lenders to Jacobson for further review.

Together, the 30 lenders named account for 75 percent of New Jersey foreclosure actions in 2010, Rabner said.

Ninety-four percent of the state’s foreclosure cases “proceed in the absence of any meaningful adversarial proceeding,” Grant said in the order.

“The significance of this disparity is even more striking because many of the contested proceedings are defended pro se,” Grant said. “Because these actions frequently lack an aggressive defense, the Office of Foreclosure and our General Equity judges are tasked with the responsibility of ensuring that justice is done for absent and pro se parties.”

Grant’s order said the alleged practices have the potential to call into question the validity of affidavits, certifications and other documents, as well as the integrity of foreclosure records, the judicial system and titles passed through purchase at foreclosure sales.

The New York state judiciary recently began requiring attorneys to make filings similar to those mandated in the New Jersey rule amendments, and attorneys general in at least four states and the District of Columbia have dictated such requirements, Grant said in his order.

E. Robert Levy of Levy & Watkinson in Woodbridge, executive director of the Mortgage Bankers Association of New Jersey, says the judiciary’s goals are “laudable,” but could have an unintended impact.

“When you issue a blanket order … the effect of that is the costs for consumers seeking loans generally will go up,” Levy says. “The slower the process in getting back your money [through foreclosure proceedings], the slower the process in getting money back out there [to lend].”

Levy is “also somewhat concerned from a lawyer standpoint,” he says, adding that he expects attorneys will be held to a high level of due diligence when certifying in court that their client-lenders’ employees have sufficiently reviewed foreclosure documents before signing off on them.

In the 2006 court year, plaintiffs filed 21,752 foreclosure actions; the number swelled to 65,222 in the 2010 court year.

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More Diligence Required in Seeking Out-of-State Heir in Foreclosure Suit

December 5, 2010 1 comment

More Diligence Required in Seeking Out-of-State Heir in Foreclosure Suit By Charles Toutant New Jersey Law Journal December 1, 2010 A default judgment for tax foreclosure was void because the plaintiff failed to locate and serve the deceased homeowner’s out-of-state heir, the Appellate Division ruled Wednesday. The case, Fidelity Asset Management, LLC v. Faine, A-1485-09, was remanded to determine if the owner of a tax sale certificate diligently tried to find the heir, whether service by publication in a New Jersey newspaper gave adequate notice to the out-of-state heir and whether mail service on one heir is adequate for another heir at the same address. New Jersey Home Construction Inc. brought a foreclosure action in December 2006 against a home in Cinnaminson for which it held the tax sale certificate. The certificate was later sold to another company, Fidelity Asset Management, which took over as plaintiff. The redemption amount on the certificate was $19,025 plus $1,180 in costs. The homeowner, Mary Faine, died intestate in 2002. The foreclosure complaint named Faine and Toni Fleming, described as “a known heir.” The complaint also included Faine’s “heirs, devisees, and personal representatives” or “any of their successors in right, title and interest” because the plaintiff alleged it “has been unable to determine her heirs.” In May 2007, Anthony Johns and Barbara Hawkins, described as known heirs of Faine, were added as defendants after the plaintiff’s attorney, Cherry Hill solo I. Dominic Simeone, learned from the Cinnaminson tax collector that they are Faine’s grandson and daughter. On Jan. 2, 2008, Burlington County Superior Court Judge Michael Hogan entered a final judgment of foreclosure against all the defendants. On Jan. 18, an order precluding transfer was entered after a motion was filed to vacate the foreclosure judgment. The order was entered by Johns; Hawkins; Hiram Johnson, a family friend who was looking after Faine’s house; and Mallonease Scott, Faine’s other daughter. The motion contended that Scott and Hawkins, who live together in Texas, are Faine’s only heirs, and that defendant Fleming was unknown to the family. Their motion contended that Fidelity failed to engage in sufficient efforts to locate the decedent’s heirs. Fidelity said it engaged in a title search, a vital statistics search and skip-tracing procedures to look for Faine’s heirs, but only found Fleming. On May 2, 2008, Hogan denied the motion to vacate after concluding that Fidelity had satisfied the requirements of Rule 4:4-4(b)(1)(c) for mail service and Rule 4:4-5 for service by publication. On appeal, Judges Howard Kestin and Donald Coburn declined to disturb Hogan’s determinations because it was based on undisputed facts and refused to reverse the judgment of foreclosure as to Hawkins and Johns. But the panel said it could not allow the judgment to stand with regard to Scott, who was not named as a defendant and was never served. “In the face of the reality that the heirs stand to lose their right to the full value of the property, whatever that may be, for failure to pay some $20,000 on a tax sale certificate, a default judgment as to Mallonease Scott cannot be countenanced without specific findings based on further proofs as to whether engaged in reasonably diligent efforts to identify and serve her,” Kestin and Coburn wrote. The heirs’ lawyer, Moorestown solo John Poindexter III, says he will prove on remand that Fidelity’s inquiry wasn’t diligent enough. Scott “was clearly the daughter of Ms. Faine — why they didn’t find her, I don’t know. They found one of the daughters — it seems to me they should have found the other,” Poindexter says.Simeone, the lawyer for Fidelity, did not return a call.