Keith Loria Oct. 13, 2010, 1:52pm
SEATTLE (Legal Newsline) - Washington Attorney General Rob McKenna announced on Wednesday that he has learned of evidence that suggests foreclosure trustees are ignoring consumer protection laws in the state.
The mortgage service industry has come under fire in recent weeks. McKenna has said that the problems aren't limited to the national banks and mortgage servicers. McKenna has sent letters to 52 foreclosure trustees detailing his concerns, calling on each of them to suspend any questionable foreclosures in Washington.
"As part of our ongoing investigation, we have received complaints and information that indicate the Washington foreclosure process frequently includes inaccurate documents, conflicts-of-interest, faulty chains of title and failures to provide the disclosures and conduct mediations required by law," McKenna said.
"Some of these practices can deprive homeowners of their legal right to assert legitimate defenses in an action to save their homes."
Since May, McKenna's Consumer Protection Division has been checking reports of lenders and trustee services that allegedly have not been properly reviewing foreclosure documents or following other legal procedures.
"Because Washington state law allows foreclosure without court oversight, you are the party most responsible for ensuring that foreclosures are done properly," McKenna wrote in the letter to trustees.
"Consequently, I ask you to suspend all foreclosures in which you have not yet confirmed that all foreclosure-related documents were lawfully signed, that the chain of ownership is clear and has been revealed to you in full, and that state consumer protection requirements have been followed."
McKenna strongly favors loan modifications and any other means to prevent foreclosures when possible and advocates working with lenders to improve communication with borrowers.
McKenna's letter expressed the specific concerns he has. Based on signatures of some trustees varying widely from document to document, he is worried that employees of foreclosure trustees are signing documents posing as the corporate officer of multiple banks and mortgage servicers. Since these are notarized with a statement that the signer is the actual person standing before the notary, this alleged practice is worrisome to McKenna.
McKenna also fears that trustees may be foreclosing on homes when there is no clear chain of ownership for the loan or the security interest. Nationally, there are reports of lenders "reverse-engineering" the chain of title, including back-dating documents to make it appear as though the loan was passed from company to company. He wants to be sure that isn't happening in Washington.
All the required information has not been on all defaults, McKenna alleges. Since July 26, 2009, Washington trustees have been required to identify the owner of the loan and the company that is acting as servicer, as well as provide an address and phone number for the servicer, which McKenna says does not always happen.
Finally, lenders are allegedly not consistently telling homeowners about their right to explore alternatives to foreclosure, which they are required to do for any borrowers who obtained mortgages between 2003-2007.
The borrowers have the right to request mediation and, if requested, the loan owner must schedule a face-to-face meeting to occur within 14 days. McKenna alleged that lenders are regularly not telling homeowners about this right.