Loan servicers, who typically steward homes through the foreclosure process, came under scrutiny several months ago for problems ensuring the validity of foreclosure documents. Many of the country’s largest servicers allegedly employed “robo-signers,” often underpaid and under-trained employees who signed thousands of statements testifying to the accuracy of the foreclosure paperwork without actually ensuring that the statements were true. When some files were scrutinized, it was found that the servicer may not have had the right to pursue foreclosure because the mortgage debt had not been properly transferred. After a ruling by the Massachusetts Supreme Court that declared two such foreclosures invalid, the legality of thousands of foreclosures has been called into question.
State officials in Illinois are taking action to make sure that servicers are complying with due process requirements when preparing foreclosure filings. Illinois Attorney General Lisa Madigan is part of a fifty-state investigation of servicers’ practices, while the Illinois Department of Financial and Professional Regulation is investigating 20 servicers and has released a nine-step plan that servicers can adopt to improve their procedures. The nine-step plan includes:
- Affiants who sign affidavits in connection with foreclosure proceedings shall not use signature stamps to sign affidavits.
- Affiants signing affidavits stating the amount owed by a borrower shall confirm that the numbers accurately reflect the numbers in the licensee’s business records and are totaled correctly.
- Affiants shall have the level of knowledge necessary to submit an affidavit in a judicial proceeding.
- Lenders and servicers shall have processes in place to seek to ensure that affidavits used in connection with foreclosure proceedings are true, accurate, and complete, including that affidavits accurately reflect the amount due to the licensee.
We believe that this plan, if adopted by servicers, could go a long way toward protecting borrowers, homebuyers, and servicers from the risks associated with sloppily-prepared foreclosure filings. We applaud IDFPR’s effort to discuss the plan with servicers and encourage them to develop more robust foreclosure processes. Currently, IDFPR is pursuing the voluntary adoption of these principles by servicers. We hope that if servicers fail to adopt the plan, the Department will consider promulgating mandatory rules that promote safe and sound foreclosure processes.
If IDFPR’s plan were to be widely adopted, Illinois would have robust safeguards in place to ensure that all parties’ rights are respected in the foreclosure process. We also support the efforts by the Attorneys General to investigate servicers’ procedures and develop protections to ensure that unlawful foreclosures don’t happen, such as a requirement to provide proof of the transfer of mortgage debt when filing foreclosure.