Maryland's high court approves foreclosure review

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Maryland courts got the go-ahead Tuesday to conduct sweeping reviews of possibly thousands of foreclosure cases to root out those with problematic or fraudulent documentation, while the federal government separately announced investigations into national foreclosure practices.

The Court of Appeals, the state's highest court, approved emergency rules to allow the hiring of part-time examiners to scrutinize paperwork.

Thousands of files might need to be examined, said Alan M. Wilner, a retired judge who heads a committee that recommends rule changes to the Court of Appeals. He predicted "massive audits."

These moves followed revelations that two Maryland foreclosure attorneys did not sign some of their affidavits but instead directed others to reproduce their signatures. An affidavit, the written equivalent of court testimony, cannot be signed on someone else's behalf.

The two attorneys submitted "corrective affidavits" acknowledging the signature problem, but it is unclear how many they filed. Judges have found hundreds in recent days. Wilner said judges also wondered if cases filed by the two attorneys or by others should have acknowledgements of affidavit problems but do not.

"Some of the judges are concerned that what has been discovered so far is only the tip of the proverbial iceberg," Wilner said Tuesday.

Those who sign affidavits must also have personal knowledge of the stated facts, which was not the case among "robo signers" at mortgage servicers handling hundreds of documents a day. That national problem — acknowledged in court depositions — also influenced the Maryland court's rule change.

The White House said Tuesday that the Financial Fraud Enforcement Task Force and the Federal Housing Administration were investigating the way institutions have handled foreclosures. That follows an announcement last week that attorney general's offices in all 50 states were launching a joint inquiry into foreclosure practices.

Robert Gibbs, the White House press secretary, said in a statement that the Obama administration is "committed to holding accountable any bank that has violated the law."

Mortgage servicers have said repeatedly that they believe the information in their affidavits is correct, even if the process was flawed. GMAC Mortgage, which had temporarily suspended evictions and foreclosure sales in 23 states, said it would move forward on individual cases as reviews were completed.

"We've been in the midst of this review for approximately two months and have found no evidence of any inappropriate foreclosures to date," said Jim Olecki, a spokesman for GMAC.

Bank of America, which had instituted a nationwide moratorium on foreclosures, said Monday that it would restart proceedings in the 23 states where it began its review. The company's inquiry will continue in the rest of the country, including in Maryland.

Advocates for homeowners have greeted mortgage servicers' assurances in recent weeks with skepticism.

"Call me crazy, but do they deserve our trust at this point? I think they've pretty much proven that we can't trust them," said Ira Rheingold, executive director of the National Association of Consumer Advocates, a nonprofit association of attorneys who represent consumers. "I can't tell you how many cases we see where they tell people, 'You owe us $10,000,' and they owe $2,000."

Gov. Martin O'Malley and the Maryland congressional delegation asked the leader of the Court of Appeals to halt foreclosures for at least 60 days. In a letter provided Tuesday to The Baltimore Sun, Chief Judge Robert M. Bell replied that he does not believe he has that authority.

But Bell noted in the letter, sent to the governor on Friday, that the court would consider changes in foreclosure rules to address "what may be a widespread problem" with documentation.

The rules approved by all six of the judges present Tuesday allow courts to charge firms foreclosing on homeowners for the cost of examiners hired to conduct reviews. Firms cannot pass the expense on to the borrowers, except in cases where reviews are needed for documents submitted by the homeowners.

Judges who come across potentially invalid affidavits can order foreclosure firms to appear in court to explain why the case should not be dismissed. The new rules make explicit the judges' right to do so. Wilner, the rules committee chairman, said members wanted to remove doubt and give judges a road map for dealing with such cases.

The rules do not require courts to conduct audits. They also do not restrict judges to reviewing cases only in which corrective affidavits have been filed. Wilner said courts might decide to examine a broader swath of foreclosure cases.

"The administrative judges are in contact with one another, and I think they're striving to figure out how they want to go about this," he said.

Some Maryland courts, including those in Howard and Prince George's counties, have begun reviewing cases and say that extra resources would help.

"This has become a very labor-intensive process," said Diane O. Leasure, county administrative judge for the Howard County Circuit Court, which has about 1,600 open foreclosure cases.

Leasure said she and a number of other judges only became aware of the corrective affidavits a few weeks ago, shortly before The Baltimore Sun reported that Bethesda-based attorney Jacob Geesing and Hunt Valley-based lawyer Thomas P. Dore had filed them across the state. Both lawyers asserted in the corrective documents that the original information was accurate — except for the signatures.

Staffers in the Howard County courthouse are pulling cases with corrective affidavits — they've found about 150 — as judges hammer out a plan for handling them.

Howard County judges are also taking a closer look at documents filed in any foreclosure case that comes before them for action, such as ratification of a sale. Problems they will be on the lookout for include affidavits filed in a case that are purportedly signed by the same person but have varying signatures, Leasure said.

In Prince George's County, Judge Thomas P. Smith said the Circuit Court would require that attorneys file new, "factually accurate" documents in cases with corrective affidavits if a foreclosure sale had not been ratified. He is scheduling hearings for corrective affidavit cases in which sales have been ratified and the lenders are seeking permission to repossess homes.

Hearings on foreclosure cases in Maryland are rare because it is usually up to homeowners to request them.

The Maryland Bankers Association told the Court of Appeals that it supports the rules approved Tuesday. But a Montgomery County woman fighting the years-old foreclosure of her home told the judges that she objects.

Tangerine Levy of Germantown said the courts are supposed to dismiss cases in which fraudulent documents were filed and that calling foreclosure firms in to defend themselves would in effect give them a "do over." Struggling borrowers do not have the money for attorneys to argue on their behalf, she said.

"Judges must not participate in this fraud," she said.

jamie.smith.hopkins@baltsun.com

http://twitter.com/realestatewonk

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