Borrowers, Beware: The Robo-signers Aren’t Finished Yet

Remember the robo-signers, those mortgage loan automatons who authenticated thousands of foreclosure documents over the years without verifying the information they were swearing to?

Well, they’re back, in a manner of speaking, at least in Florida. Their dubious documents are being used to hound former borrowers years after their homes went into foreclosure.

Robo-signer redux, as it might be called, has come about because of an aggressive pursuit of former borrowers by debt collectors hired by Fannie Mae, the mortgage finance giant. What Fannie is trying to recoup from these borrowers is the difference between what the borrowers owed on the mortgages when they were foreclosed and the amount Fannie received when it resold the properties.

These monetary amounts — and they can be significant — are known as deficiency judgments. It is legal in most states for lenders to pursue them. (California is one notable exception.) The time limit for debt collectors to go after former borrowers varies from state to state; Florida allows deficiencies to be pursued for 20 years, and borrowers must pay a compounded annual interest rate of 4.5 percent.

The problem, experts say, arises when robo-signed documents enabled banks to foreclose even when they didn’t have legal standing to do so.

“Sending these cases to debt collectors when the underlying foreclosures involved unlawful robo-signing is unfair and potentially even deceptive,” said Kathleen C. Engel, a research professor at Suffolk University Law School in Boston. “Fannie Mae is not entitled to collect on those debts when the foreclosure was unlawful.”

A Fannie Mae spokesman, Andrew J. Wilson, declined to comment on Ms. Engel’s contention. But he said Fannie filed deficiencies “in a minority of cases where there was a foreclosure.” He acknowledged, however, that Fannie was bringing several thousand cases in Florida because of a recent state law requiring that any such borrower suits be filed by July 1 of this year.

Read on.

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