A foreclosure manual purportedly belonging to Wells Fargo Bank has been released online by Washington Post.com. The manual was discovered as part of a foreclosure case by a New York attorney.
The manual allegedly contains instructions for the bank’s attorneys on how to produce missing documents in foreclosure cases. The manual is now subject to investigations by the attorney general for New York State, the consumer Financial Protection Bureau and the US Trustee’s Office within the Department of Justice. For a copy of the manual go to Washington Post.
Two particularly troubling allegations include missing or lost loan documents. First, the manual allegedly shows lawyers what to do in the event of a lost affidavit. Secondly, it has instructions for lawyers in cases where there is no documentation showing the history of who owned the loan.
First, these are documents that the bank should have before filing foreclosure. Otherwise, how can it be sure that it owns the loan. Worse yet, how can they be certain that they can prove the right to foreclose on the loan should the homeowner object after the foreclosure sale has gone through.
By now, most homeowners have heard of robo signing scandal that halted foreclosures in multiple states around the country. That scandal involved affidavits signed under very suspicious circumstances. Apparently, the banks hired people whose sole job was to sign affidavits. Affidavits by definition require the person signing have personal knowledge of the facts alleged in the document. The robo signers did not have personal knowledge or review files before signing. They just signed affidavits all day long.
This takes us back to the first problem highlighted in the manual. Dealing with lost affidavits. If the manual created a way for the falsification of these affidavits then we are back to square one. If these falsified affidavits were presented in court and used to foreclose on home then the bank could be in a tough spot again.
The second issue revolves around missing documents and conjures the worst fears about the foreclosure process. Could the banks be foreclosing homes using falsified documents again? Wasn’t this issue deal with as part of the various mortgage settlement agreements reached between the banks and both State and Federal governments? Or is the system of falsifying documents so entrenched that it continues unabated? The outcome of this litigation and any investigations by the agencies identified above are key to answering that question. At this point, it is not clear that Wells Fargo has done anything wrong. But is sure looks bad.
However, a bank lawyer quoted in the Washington Past article offered a different viewing on the manual including the fact that mortgage notes can be endorsed in blank due to the fact that they are often sold multiple times. This means that when bank A sells a mortgage note to bank B the endorsement indicating that bank B is the new owner may be blank omitting the name of the latter as a matter of practice. This would allow bank B to sell the same note with relative ease.
The investigation into this manual and Wells Fargo’s practices is just beginning and the outcome will impact foreclosures well beyond New York. In light of the fact that some prognosticators are projecting a potential increase defaults as a result of the increase in monthly mortgage payments for loans that were modified in the last couple of years, it will be important to ensure the foreclosure process is fixed.
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Disclaimer: This article is provided for informational purposes only and should not be construed in any way as legal advice. This article does not create an attorney-client relationship.