AG: Allen County judge led way to best foreclosure judicial practices

Zoeller: Judge’s settlement conference part of approach recommended statewide

FORT WAYNE, IN – January 26, 2011 – (RealEstateRama) — Indiana Attorney General Greg Zoeller was in Fort Wayne today with Allen County Superior Court Judge Nancy Boyer to discuss a new foreclosure prevention effort to ensure borrowers’ legal rights are fully protected and mortgage lenders follow the law.

The Attorney General’s petition urging the Indiana Supreme Court to adopt “best practices” for mortgage foreclosures comes as the 50-state investigation continues into improper “robo-signing” in foreclosure procedures by mortgage lenders and servicers.

“When some mortgage lenders try to foreclose on distressed homeowners by filing foreclosure documents that are unverified, unauthenticated or riddled with errors, it not only violates the rights of the homeowners but it is also a fraud upon the court. In Indiana, we are not going to wait for federal government action; we will forge ahead to craft our own solution,” Zoeller said.

“Judge Boyer’s efforts to facilitate settlement conferences between lenders and borrowers has become a model for the state — and the basis for the ‘Mortgage Foreclosure Best Practices’ petition that we have asked the Indiana Supreme Court to adopt. We commend her leadership,” Zoeller added.

A foreclosure-prevention task force established by the Indiana Supreme Court developed a list of guidelines to provide assurances to lenders, servicers, courts and borrowers that state and federal laws are being followed for the protection of homeowners. The Indiana Supreme Court’s task force included the Attorney General’s Office, judges, Supreme Court staff, legal services attorneys and private-practice attorneys for mortgage lenders.

On January 3, Zoeller’s office filed in the Supreme Court a petition — called “Mortgage Foreclosure Best Practices” — that included all the task force proposed guidelines and added some wording to strengthen them. The Supreme Court took the proposals under advisement and could decide at a later date whether to adopt them as requirements that lenders and services would have to follow.

“The Attorney General’s action in filing his petition urging the Indiana Supreme Court to adopt and strengthen mortgage foreclosure practices is invaluable to the citizens of the State of Indiana. It seeks a level playing field for all litigants in the foreclosure process, lenders and borrowers alike,” Judge Boyer said.

The proposed best practices developed by the task force would do the following:

. Require a mortgage lender seeking to foreclose to produce the original signed mortgage note when asked by the court – or other legal proof if the original cannot be located — and the chain of title proving that the lender has the right to enforce the note.

. Require that the court send a notice to the borrower of their legal right to a settlement conference with the lender; and require that the judge not take final action until the settlement-conference report has been filed with the court.

. Prohibit the mortgage lender from asking the borrower to waive his or her legal right to a settlement conference.

. Allow courts to impose monetary sanctions on lenders who fail to comply with the Best Practices. The petition notes that Judge Boyer in Allen County and judges in St. Joseph County have ordered sanctions of between $150 to $2,500 for similar violations.

Because of concerns that some distressed borrowers have not been given the full opportunity to pursue “loss mitigation” – alternatives to foreclosure, such as loan modification with stay-in-home workout or a short sale – the Attorney General’s petition includes additional wording to strengthen the task force proposals. It would require the mortgage lender to show, by verified affidavit, that the lender complied with federal requirements concerning borrowers’ legal rights during foreclosure, including providing borrowers with reasons for a denial of modification or other loss mitigation. And it would prohibit a court from ordering a home foreclosed if the borrower is being evaluated for a loan modification under the federal Home Affordable Modification Program or similar programs.

If adopted by the Supreme Court, Zoeller’s petition also would make the task force proposals requirements rather than recommendations. “By some estimates, a sizeable percentage of homeowners facing foreclosure are not represented by attorneys, so we must ensure the process is fair,” Zoeller said.

“These proposed best practices such as those Judge Boyer has innovated would provide much-needed transparency to the foreclosure process, encourage appropriate investigation and disclosure by the servicer and lead to better enforcement of existing federal rules,” Zoeller added. “I hope the Supreme Court will adopt the recommendations and implement them in Indiana’s courts.”

On October 13, Zoeller announced that Indiana and the other 49 states had launched an investigation into fraudulent and illegal practices in the mortgage-servicing industry. The multi-state investigation was sparked by admissions by some mortgage lenders’ employees that they signed foreclosure documents without reading or understanding them, and allowed those documents to be filed court without authenticating them. The practice is known as “robo-signing,” and the result of the lack of due diligence has been numerous mistakes and even complaints that potentially erroneous foreclosure actions were filed against homeowners, some of whom were not delinquent on their mortgage payments. The 50-state investigation, led by Iowa, is ongoing.

On November 16, Zoeller organized and led a civil justice summit at the University of Notre Dame on the legal, economic and social impact of mortgage foreclosures in Indiana and efforts by all three branches of state government to stop mortgage fraud and assist borrowers in avoiding foreclosure.

Zoeller warns homeowners not to use illegal for-profit “foreclosure rescue” consultants when nonprofit organizations offers foreclosure-prevention advice for free. Contact the Indiana Foreclosure Prevention Network (IFPN) toll-free at 1(877)GET-HOPE or www.877gethope.org for advice at no charge.

NOTE: Attorney General Greg Zoeller’s petition to adopt Mortgage Foreclosure Best Practices, filed January 3 with the Indiana Supreme Court, is found at this link:

http://www.in.gov/portal/news_events/files/Petition_SC_MortgageForeclosureBestPractices.FILESTAMPED.1.3.11.pdf

Contact:
Molly Butters
Phone: (317) 232-0168
Email: Molly.Butters (at) atg.in (dot) gov

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