Massachusetts Foreclosures Reviewed Following Errors
The state’s top bank regulators said yesterday that they plan to scrutinize the foreclosures made by major national mortgage lenders in Massachusetts, following mounting reports of errors in such proceedings across the country.
Barbara Anthony, undersecretary of the Office of Consumer Affairs and Business Regulation, said the state will examine procedures to make sure lenders are following the law. The move follows decisions by Bank of America Corp. and other major lenders to temporarily freeze foreclosures in other states over concerns that errors were made.
“The Massachusetts Division of Banks has extensive safeguards in place to ensure that homeowners facing foreclosure receive the strong protections they deserve,’’ said Anthony, adding that the state will “coordinate appropriate actions with federal and state enforcement authorities to ensure compliance with Massachusetts requirements.’’
Housing advocates and state officials have been calling for swift action to make sure foreclosures are being handled properly.
On Saturday, Attorney General Martha Coakley urged Bank of America and other major lenders to stop foreclosures in Massachusetts until they can prove they have complied with local law. The call came a day after Bank of America joined JPMorgan Chase & Co. and GMAC Mortgage, a part of Ally Financial, in a foreclosure slowdown in 23 states that carry out the proceedings in court.
Chase spokesman Tom Kelly said the lender stopped foreclosures last week after learning that some employees signed affidavits on loan documents without “personally having reviewed those files.’’ He said the lender did not stop procedures in Massachusetts because state law does not require similar paperwork.
Bank of America officials made their decision after a deposition surfaced from a bank executive who said she signed as many as 8,000 foreclosure documents a month without reviewing them. The deposition came from a lawsuit filed last year in US Bankruptcy Court in Massachusetts.
Bank of America officials declined to comment for this story.
James O’Connor Jr., the Fitchburg lawyer who represents Patricia Starr in bankruptcy court, said the testimony by the Bank of America executive exemplified an “industry practice’’ in which servicers sign foreclosure documents in bulk.
“It is a standard practice,’’ he said. “They don’t read them. They don’t know what they are signing. There is no notary present.’’
Housing advocates say that the situation may be worse in Massachusetts because lenders are making the same kinds of mistakes here, but there’s no judge to oversee the process. Foreclosure proceedings don’t require court approval in Massachusetts.
“The lenders are doing the exact same thing here that they are doing everywhere else,’’ said Paul Collier, a Cambridge lawyer who represents homeowners fighting foreclosures. “It’s the same liars telling the same lies.’’
Kathleen C. Engel, associate dean for intellectual life at Suffolk University Law School, said the recent controversy points out a weakness in Massachusetts law.
“Massachusetts is quite handicapped,’’ said Engel. “Massachusetts has essentially adopted a law that gives a free pass to lenders.’’
State Senator Susan Tucker, Democrat of Andover, said the Joint Committee on Housing recently considered a plan to require judicial review of foreclosures but tabled the discussion because of lack of funding.
“Unfortunately, it was just the beginning of the financial meltdown and it was impossible to get enough support for the kind of beefing up of the court system,’’ she said.
The validity of foreclosure procedures has been at issue in Massachusetts since 2009 after a Land Court ruling that two foreclosures in Springfield were invalid because ownership of the mortgages were not clear when the properties were sold.
The case addressed issues created during the housing boom as millions of mortgages nationwide were bundled into bonds and sold to investors, often resulting in a twisted paper trail that obscured ownership. Lenders would sometimes file final paperwork on a foreclosure sale, including validating ownership, after the deal was completed. The Supreme Judicial Court is expected to hear oral argument on the case this week.
Collier, who represents one of the homeowners in the Land Court case, said this week’s hearing relates directly to current questions about the foreclosure process. “It is the same kind of document falsification process that is being exposed,’’ he said.
The discussion comes as foreclosures continue to rise in Massachusetts. In August, 1,207 owners lost their homes, an 83.2 percent increase from the 659 reported during the same month in 2009, according to Warren Group, a Boston company that tracks local real estate. During the first eight months of the year, 9,887 owners lost their properties to foreclosure — surpassing the 9,269 completed foreclosures recorded during all of last year, the group said.
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