Mortgage Foreclosures Scrutinized by New Jersey Supreme Court

The New Jersey Supreme Court is moving to monitor the <"">mortgage foreclosure practices of banks in that state. According to the Associated Press, six lenders suspected of employing “robosigners” to process foreclosure documents- Bank of America, Ally Financial Inc.’s GMAC mortgage unit, OneWest Bank, Wells Fargo, JP Morgan Chase, and Citibank – are facing a possible foreclosure freeze in the state because of the court’s action.

Earlier this fall, several lenders suspended various aspects of the foreclosure process after discovering irregularities in the preparation of court documents. In many instances, the banks outsourced foreclosure processing to “foreclosure factories,” which processed tens of thousands of court documents every month. It now turns out that the foreclosure affidavits processed by those companies were signed by personnel who came to be known as “robo-signers.” In many cases, the robo-signers were not reading or verifying documents where they were signed, and in many documents were not properly notarized.

The banks’ disclosures have prompted multiple investigations, including the one by attorneys general in all 50 states. Those investigations could uncover criminal misconduct or large-scale errors that force foreclosures to be put on hold for an extended period of time. That will encourage thousands of people whose homes have been seized or are facing foreclosure to mount legal action against the banks.

Under a court order announced yesterday by New Jersey Supreme Court Chief Justice Stuart Rabner, the six banks were ordered to appear in state Superior Court in Trenton on January 19 to demonstrate why the state shouldn’t suspend their foreclosure actions, the Associated Press said. Between them, these lenders have processed more than 29,000 foreclosures in New Jersey.

During a conference call yesterday, Rabner said he was most concerned that 94 percent of the 65,000 foreclosures filed in New Jersey this year have been uncontested, mostly because homeowners can’t afford a lawyer. “That means there’s no meaningful adversary process to protect them,” Rabner said.

“It’s important that the judiciary ensures judges are not rubber-stamping documents that may not be reliable,” Rabner said. According to the Associated Press, Rabner said he believed that New Jersey was the first state to take such action against mortgage lenders.

Rabner also announced that 24 other lenders will be required to submit documentation to a special master, retired state Superior Court Judge Walter R. Barisonek, to demonstrate that there are no irregularities in their handling of foreclosure proceedings. According to the Associated Press, these 24 lenders have not been accused of wrongdoing. They were selected because each had processed at least 200 foreclosures this year.

According to the Associated Press, the New Jersey Supreme Court also issued an order yesterday requiring attorneys in all residential foreclosures to certify that lenders have reviewed documents for accuracy and confirmed the accuracy of all court filings.

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