NEW YORK Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more widespread than thought, tainting the deeds of tens of thousands of homes dating to the late 1990s.
The suspect documents could create legal trouble for homeowners for years.
Already, mortgage papers are being invalidated by courts, insurers are hesitant to write policies, and judges are blocking banks from foreclosing on homes. The findings by various county registers of deeds have also hindered a settlement between the 50 state attorneys general who are investigating big banks and other mortgage lenders over controversial mortgage practices.
The problem of shoddy mortgage paperwork, which comprises several shortcuts known collectively as robo-signing, led the nations largest banks, including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and other lenders to temporarily halt foreclosures nationwide last fall.
At the time, robo-signing was thought to be contained to the affidavits banks file when a mortgage is issued and somebody buys a house. The documents are used to prove they have the right foreclosure if the homeowner isnt making mortgage payments. Companies that process mortgages said they were so overwhelmed with paperwork that they cut corners.
But now, as county officials review years worth of mortgage paperwork, in some cases combing through one page at a time, they are finding suspect signatures either signed with the same name by dozens of different people, improperly notarized or signed without a review of the facts in the paperwork on all sorts of mortgage documents, dating as far back as 1998, The Associated Press has found.
Because of these bad titles, property owners cant prove they own the properties they think they bought, and banks cant prove they had the right to sell them, says Jeff Thigpen, the registrar of deeds in Guilford County, N.C.
In Guilford County, where Greensboro is located, a sample of 6,100 mortgage documents filed since 2006 turned up 74 percent with questionable signatures. Thigpen says his office received 456 more documents with suspect signatures from Oct. 1 through June 30. The suspect signatures found by Thigpen and other registrars around the country were on documents from the banks involved in the temporary foreclosure halt and others.
Widespread robo-signing that stretches back a decade or more could create problems for homeowners. Regulators have so far not asked lenders to clean up the potentially millions of suspect documents filed in the past decade or earlier. That troubles some banking experts, including Sheila Bair, who until early July was chairwoman of the Federal Deposit Insurance Corp.
We do not yet really know the full extent of the problem, Bair told the Senate Banking Committee.
She and others have called for a comprehensive study on the extent of the fraudulent signatures in mortgage documents.
If documents with robo-signed signatures are challenged in court, judges could question the ownership of the properties, says Katherine Porter, a professor at University of California Irvine School of Law and an expert on consumer-credit law. The consequences extend to homeowners in good standing when they try to sell.
If invalid documents are discovered in the chain of ownership, it could delay the sale or make it difficult for buyers to get a mortgage because title insurers wont write a policy for the property, says Justin Ailes, vice president of government affairs of the American Land Title Association, a trade association representing the title insurance industry. Banks and other mortgage lenders wont write a home loan without title insurance.