State Court Officials Ponder Foreclosure Freeze

Published: Thursday, October 7, 2010 in CT Post, Stamford Advocate & Greenwich Time

Foreclosures will continue in the state while top court officials review the legality of imposing a moratorium due to defects in the filings on behalf of some of the nation's largest banks.

"At a brief meeting this morning, it was determined to collect more information and to complete the legal review of the issues stemming from the attorney general's request for a moratorium on foreclosures," said Rhonda Stearley-Hebert, a spokeswoman for the state Judiciary. "We expect to have determined the appropriate course of action by next week."

Judge Barbara M. Quinn, the state's chief court administrator, met with other top judges and officials to discuss what has become known as the robo-signing scandal and other issues plaguing the paperwork of the nation's largest banks as they continue to foreclose on thousands of homes.

Attorney General Richard Blumenthal called for the moratorium last week following revelations that some of the nation's largest banks were filing what appear to be false affidavits in foreclosure actions across the country.

GMAC/Ally Bank, Bank of America and JP Morgan Chase have, to varying degrees, suspended some foreclosure actions after it came to light in Florida and California that executives were signing affidavits claiming to have personal knowledge of cases when they did not.

It appears these executives were just signing the affidavits and not verifying the information in the lawsuits. Citibank and Wells Fargo have also been accused of having similar procedures in place for signing affidavits.

The banks that have elected to suspend some foreclosure activity are reviewing cases in the 23 states that require court action to foreclose, including Connecticut. Here, the affidavit in question appears to be the affidavit of debt required as part of the foreclosure filing. This legal document says the signer "is familiar with the facts stated below," and then requires the filer to describe how the defendant is indebted to the plaintiff.

Stamford Attorney Mark Sank, of Mark Sank and Associates, said he has been trying to bring this issue out in the open for two years.

"I represent 40 or 50 families," Sank said Thursday. "I've been filing notices of deposition on the affiants."

He said it seemed pretty obvious that the people signing these affidavits didn't have the knowledge needed to sign them. He said in some cases, the signer was claiming to have personal knowledge of the practices and books from failed lenders. He said he's seen affidavits that mortgage servicers have signed. Though he has won his motion to depose the affiants, or signers of the documents, he said the banks have so far not produced them.

"Now I know why," he said, noting what has come out in other cases in other courts when signers are asked questions under oath. He said the issue is huge here and it goes beyond the banks that have suspended some of their foreclosures.

In Connecticut, GMAC has about 5,000 foreclosure cases, according to Deborah Fuller, another judiciary spokeswoman. The other two banks have thousands of cases listed on Judiciary's website, but these include collections and other suits that are not foreclosures.

A former regulator and the state's top banking regulator say the situation requires action from the judges to prevent the growing crisis in confidence in the financial system from infecting the legal system.

"It puts everybody in a pretty bad position," said Howard Pitkin, state Banking Department commissioner. "What about the people whose homes have been foreclosed? What do we do going forward? You can't have a process that is not a legal process. You have to give people their rights."

He said this could drag out the foreclosure process even more, which could help some families try to get back on their feet and catch up with payments. But it could also lead to problems for the industry if some properties are not taken and are allowed to be abandoned and fall into disrepair, he said.

Attorney Richard Slavin, a former director of the Connecticut Banking Department's Securities and Business Investments Division who was also a staff attorney in the Division of Enforcement at the United States Securities and Exchange Commission, said this is not a case of a few bad apples that the courts need to address.

"When five banks do it, it's a systemic problem," said Slavin, managing partner of the law firm Cohen & Wolf's Westport office, where he also serves as principal and chair of the firm's Securities Group.