Consumer Law

Judge Dismisses Foreclosure Case Due To Bank Error

By M. Stan Herring

The Wall Street Journal has posted an article about a "fraud" committed by a major national bank in a foreclosure lawsuit. The Florida case began in December 2007 when U.S. Bank N.A. sued Ernest Harpster, a homeowner, after he defaulted on a $190,000 loan from January of the same year.

The lawyer who represented the bank drafted up an "assignment of mortgage" document that said the bank acquired the mortgage in December 2007. The document was also dated December 2007. Circuit Court Judge Lynn Tepper looked into it and found that the document couldn't have been written until 2008 and thus the bank couldn't prove that it owned the mortgage when they sued Harpster. She dismissed the case because she felt that the document...

"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."

The mistake was blamed on "carelessness" and that the document was drafted up and signed in 2007 but wasn't notarized until a few months later. After several other similar suits were noticed with the same bank, the firm withdrew the suits and re-filed them later after using "appropriate documents."

Some of the problems stem from the difficulty banks face in proving they own the loans, thanks to the complexity of the mortgage market.
The Florida ruling against U.S. Bank was also a critique of law firms that handle foreclosure cases on behalf of banks, dubbed "foreclosure mills."

"The pure volume of foreclosures has a tendency perhaps to encourage sloppiness, boilerplate paperwork or a lack of thoroughness" by attorneys for banks, said Judge Tepper of Florida, in an interview. The deluge of foreclosures makes the process "fraught with potential for fraud," she said.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

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Full post as published by Alabama Consumer Blog on April 21, 2010 (boomark / email).