There have been so many U.S. home foreclosures that at least one loan servicer apparently took liberties with the rules regarding paperwork.
In response to a suit filed by a dispossessed Florida homeowner, an employee of GMAC Mortgage, now part of Ally Financial, testified he didn't always read and sign foreclosure affidavits, as required by law.
Now banks and law firms are on the defensive. Bad documentation, falsely notarizing signatures, and the courts pushing homeowners through the foreclosure process also known as the "rocket docket," are coming to a quick halt as the tides turn on the banks in favor of the homeowner.
"It's as if the curtain has finally been pulled back," said Roy Oppenheim, a legal blogger and foreclosure defense attorney who has been predicting what he terms a house of cards for the past two years on his South Florida Law Blog.
"The world now has evidence to what ends the banks will go to falsify documents and encourage individuals to perjure themselves by falsely notarizing signatures," he said.
But what exactly does all this mean for homeowners in Florida, and elsewhere? No one really knows.
Tip of the iceberg
"This is the tip of an ugly iceberg," said Oppenheim. "The impact of this news will have far-reaching effects to homeowners, home buyers, banks and title insurers. It will affect capital flows in the real estate market for years and rather than speed up the foreclosure process, this will gum it up and slow it down for years.
Housing analysts are counting on a speedy resolution of the foreclosure crisis to getting the real estate market back on its feet. A slower process means the housing recession could drag on longer than predicted.
Oppenheim says investors may file lawsuits against banks, triggering a future liquidity problem.
What does this mean to homeowners in Florida, where foreclosures are among the most numerous in the nation?
Oppenheim says the recent bank errors are leaving foreclosures in question. The issue has broad consequences, not just for the people who lost homes, but for the millions of buyers of foreclosed homes, some of whom might not have clear title to their bargain property.
However it's finally resolved, Oppenheim calls it a "game changer" for underwater homeowners who might be facing foreclosure. Such errors, he says, may also result in unforeseen opportunities for those who were evicted.
