State and federal authorities plan to investigate how foreclosures are handled, according to Colorado Attorney General John Suthers. The Federal Deposit Insurance Corp. and the Federal Reserve are among the federal regulators expected to join an investigation announced by the attorneys general of all 50 states on Oct. 13. One of the key issues is whether lenders or their representatives provided improper affidavits in the 23 states that handle foreclosures through the courts.
Colorado is the only state in the nation that relies on public trustees or country treasurers to handle foreclosures. The State requires owners of a mortgage (or a legal representative) to sign two certifications. Suthers said his office will look into whether those attorneys have actually seen the original evidence of debt and the trail of assignments required as a mortgage changes hands from one party to another. Suthers is one of seven attorneys general on the executive committee of the combined state probe. He emphasized that the attorneys general aren’t alleging misrepresentation, but want to test the “veracity” of the process.
Note: During a NAR webinar on the issue, presenters said that in almost all of the cases against the so-called “robo-signers”, problem cases arose when liens were not removed from titles, rather than improper foreclosures on properties owned by people who had not missed mortgage payments. Jeff Lischer, a policy analyst for NAR, said that in spite of widespread media reports, the regulators and banks are working cooperatively to solve foreclosure errors. Government officials say a blanket national moratorium on foreclosure sales would do more harm than good. For its part, NAR argues that the market is already fragile and is urging banks to put more resources into short sales and loan modifications. Lischer said NAR hopes the problem will be solved within a few months but that the situation is fluid and rapidly changing.