What is Robo Signing Foreclosure Mortgage

Following a report in the Washington Post in October 2010, the shady financial practice known as robo-signing has been put under the harsh glare of media scrutiny, leading huge lenders such as JP Morgan and Bank of America to suspend mortgage foreclosures across at least 23 US states at the time of writing.

But what is robo-signing. Below is a concise definition of the term, with a little context.

Robo-signing, a term first identified by consumer and investor advocate Nye Lavalle as far back as 1999, refers, as the name suggests to the automatic generation of documents. In the case of the most recent scandal, these documents refer to mortgage arrears and forceclosure notices, and the upshot is that many people may have effectively lost their homes or been threatened with the loss of their homes without their lender having even read the relevant foreclosure documents, and certainly without a notary being present.

The practice seems callous and cynical at best, but could also turn out to be ruled illegal. In order to begin the foreclosure process on a defaulting mortgage, lenders must by law be able to produce a sworn affidavit verifying that the trust owns the mortgage in question, and that it is at least six months in arrears.

Following the credit crunch and subsequent economic downturn, lenders have been accused of robotically signing off thousands, perhaps even hundreds of thousands of these affidavits, to deal with a huge surge in foreclosures. Essentially they have been accused of cutting an administrative corner, but a corner which happens to be a legal requirement.

The process has got sloppy, with the notary not being done until much later than the robo-signed notices, and apparently this has been months later in some cases. It has been alleged that some lenders and trusts are robotically pursuing foreclosure proceedings against mortgage loans which they do not even own, and that some homeowners do not even in fact know who actually owns their mortgage, and to whom they need to pay the money required to prevent the loss of their home.

Large lenders have acknowledged the problem, and announced the afore-mentioned freeze on foreclosures while investigations are carried out into the practice, but they maintain that in the vast majority of cases, although the robo-signing procedure may be called into question, ultimately the documents are correct and accurate and homeowners really are at risk of losing their properties. The scandal over robo-signing has caused a delay to the foreclosure process for thousands of American homeowners, but it is not a reprieve. Hopefully the delay will give many households an opportunity to resolve their financial commitments.