As the foreclosure process implodes in the U.S., the big banks and their defenders are scrambling to defend the mess they’ve created, dismissing serious legal issues as mere technicalities.
I covered courts as a reporter for years and I learned something about legal technicalities.
What I learned was that whenever some lawyer started dismissing some legal rule as a technicality, they were about to try to heave some of their adversary’s fundamental rights out the window.
In the foreclosure mess, those adversaries would be the banks’ former business partners, their borrowers, the people they loaned money to.
Now the big banks are trying to dismiss the rules that govern the foreclosure process as legal technicalities.
Take for example the Florida case in which a judge ruled earlier this year that a document that was supposed to show that U.S. Bank owned the mortgage in December 2007 wasn’t created until the following year. The document filed by the bank, the judge wrote in March, “did not exist at the time of the filing of this action…was subsequently created and…fraudulently backdated, in a purposeful, intentional effort to mislead.” She dismissed the bank’s case.
The bank’s lawyer blamed carelessness. He explained: “Judges get in a whirl about technicalities because the courts are overwhelmed….The merits of the cases are the same: people aren’t paying their mortgages.”
One of the other things I learned was that judges tended to use very precise wording in their rulings. If the judge in the Florida case was feeling overwhelmed, she didn’t mention it. What she did say what that somebody had fraudulently created a document.
That’s not a technicality. And it doesn’t matter if you’ve been making your mortgage payment or not. Banks are not allowed to foreclose on a home using fraudulent documents. Period.
One of the aspects of the rule of law is that it applies the same to everybody: a bank isn’t allowed to submit fraudulent documents to a court any more than a pauper is. That’s not a technicality. That’s the rule of law.
In the most recent brouhaha, a number of big banks, Ally, PNC Financial, J.P. Morgan Chase and Co and Bank of America, have acknowledged that their officials didn’t actually read key foreclosure documents before submitting them in court. Some documents appeared to have been forged; others appeared to contain false information.
A number of state attorney generals across the country have threatened legal action against the banks. Faced with a firestorm, some banks have voluntarily halted foreclosures in 23 states: the ones where judges oversee foreclosures. Only Bank of America has halted foreclosures in all 50 states.
One of the first banks to acknowledge that its own paperwork hadn’t been properly reviewed was Ally Bank, formerly known as GMAC. The latest controversy wasn’t the first time GMAC’s legal work on foreclosures came under scrutiny.
In 2006, Bloomberg News reported, another Florida judge sanctioned the company, finding that it submitted false affidavits to the court in a foreclosure case. The judge ordered GMAC to submit an explanation, certify that its policies had changed and pay the opposing party’s legal costs of more than $8,000.
As a result, GMAC’s legal department issued a statement that told employees “not to sign verifications on court pleading documents unless you have independently reviewed and checked the facts.”
The new policy, the Journal reported, was distributed in June 2006; it also stated in italics and boldface that GMAC employees should sign documents only in the presence of a notary. GMAC told the court that the policies were “being corrected.”
Three and a half years later, a GMAC employee said in a deposition that his team of 13 people signed about 10,000 documents a month without reading them.
Deborah Rhode, a Stanford Law professor, told Bloomberg, “It’s not ‘technical’ when people attest under oath to knowledge they don’t have, and it doesn’t matter that in fact there isn’t actual error or discrepancy,” Rhode said. “Any court would take this very seriously.”