Foreclosure problems hitting home in Wis. (UPDATE)

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By Paul Tharp, Lawyer’s Weekly

Bank of America has suspended foreclosure sales nationwide pending a review of foreclosure documents in all 50 states.

Spokesman Richard G. Simon said Friday that the bank would “stop foreclosure sales until our assessment has been satisfactorily completed.”

Spokesman Dan Frahm added that the “ongoing assessment shows the basis for our past foreclosure decisions is accurate.”

The action may be in response to North Carolina Attorney General Roy Cooper’s demand that Bank of American suspend mortgage operations in the state until the bank can prove that its foreclosure practices are consistent with state law.

The announcement comes on the heels of revelations about mortgage and foreclosure document problems that have shaken the mortgage industry.

The shoddy record-keeping has placed lenders and mortgage servicers in the sights of the attorney general. Poor intra-company communication has placed lenders in the sights of trial attorneys.

Court challenges of foreclosure documents presented by lenders are rare, said Milwaukee County Circuit Judge Charles Kahn.

“On average civil judges hear 10 to 35 foreclosure cases every Monday morning,” Kahn said of the 12 civil courts in Milwaukee. “More than 95 percent of the time property owners do not show up to protest the foreclosure.”

Another judge, Thomas Cooper, agreed that the banks are rarely challenged on their paperwork but recalled that it happened in his court recently.

“I was quite surprised at the lack of paperwork that the lawyer for the bank had at hand,” Cooper said. “But eventually he did get the documents and everything was in line.”

Kahn said the judges in Milwaukee are concerned about the impact of the allegations that bank officials were “robosigning” documents without reading them as required. He said the judges would meet next week to discuss how to proceed with such cases.

David Kingstad, a Milwaukee lawyer who has represented several homeowners protesting foreclosure actions, said he has a case that he anticipates will depose at least one bank official soon in a case pending in Milwaukee.

“The allegation is that they are signing 10,000 documents a month,” Kingstad said. “I’m interested in finding out how they can read that many documents before signing them.”

He said he had heard that at least one of the banks in the Milwaukee is fearful the allegations could call into question the validity of property sold.

“I’ve heard that at least one bank is going to halt sales of property they own through foreclosure,” Kingstad said.

Record-keeping under fire

As the foreclosure slide has steepened, lenders filing the most foreclosures in the state have come under increasing scrutiny for their foreclosure practices.

Bank of America, Chase and Ally Bank announced in late September that they were suspending thousands of foreclosures in 23 states — including Wisconsin — because representatives had signed off on chain-of-custody affidavits without reviewing individual files.

Thomas A. Kelly, a spokesman for J.P Morgan Chase & Co., told Lawyers Weekly, a sister publication of The Daily Reporter, that “in some cases employees in our mortgage foreclosure operations may have signed affidavits about loan documents on the basis of file reviews done by other personnel, without the signer personally having reviewed those loan files.”

Kelly said Chase is working with independent outside counsel to review the affidavit-preparation and signature process to confirm that they satisfy all documentary and evidentiary standards. Its review is expected to be completed within a few weeks.

‘The right hand doesn’t know what the left hand is doing’

Nathan DeLadurantey of DeLadurantey Law Office in Milwaukee said a recurring issue with lenders has been clients who are in loan modification programs unexpectedly receiving foreclosure notices.

“They have a systemic problem of the right hand doesn’t know what the left hand is doing,” he said.

From a practical standpoint, DeLadurantey said Friday’s announcement gives people facing foreclosure another chance to avoid the process.

“I think it’s going to give a lot of people the time and the breathing room they need to get their loan modifications in place,” DeLadurantey said.

For people currently facing foreclosure, DeLadurantey’s interpretation of the announcement was that if the debtor is at the stage of a sheriff’s sale being confirmed, that’s where the process would stop. If the foreclosure hasn’t yet reached that stage, it would continue until that point.

“For those in the 11th hour, it’s a lifesaver,” he said. “For everyone else, there’s no difference.”

And for those who have already been through foreclosure, DeLadurantey said it will still be difficult to challenge a case that’s already been decided.

“There are pretty high hurdles to overcome,” he said. “Getting that judgment or foreclosure overturned, you’ve got to have some facts to go after. I think with some of the issues people have raised, you’re going to get a hearing on that. But you’re going to have to prove it. I’m not convinced that every loan’s a bad loan, but they’re sure out there. “

Bill Cosh, a spokesman for Wisconsin Attorney General J.B. Van Hollen, said his office was reviewing the actions of the banks.

The Daily Reporter’s Marie Rohde and the Wisconsin Law Journal’s Casey Laughman also contributed to this report.