AFTER examining their foreclosure practices for flaws in mortgage documentation and other procedures, many of the nation’s largest banks have resumed — or will soon resume — trying to evict defaulted borrowers. …
“If we find any foreclosures in error, we will fix them,” JPMorgan Chase said.
But while banks may have booted a few robo-signers and tightened up some lax procedures, one question at the heart of the foreclosure mess refuses to go away: whether institutions trying to take back a property can prove they even have the right to foreclose at all.
Some in the industry believe that questions about this issue — known as “legal standing” — are trivial. They say it’s just a gambit by borrowers’ lawyers to throw sand in the foreclosure machine. Nine times out of 10, bankers say, the right institutions are foreclosing on the right borrowers.
Maybe so. But the United States Trustee Program, the unit of the Justice Department charged with overseeing the integrity of the nation’s bankruptcy courts, is taking a different view. The unit is stepping up its scrutiny of the veracity of banks’ claims against borrowers, and its approach is evident in two cases in federal bankruptcy court in Atlanta. …
David Shaev, a lawyer in New York who works with troubled borrowers, says the United States trustee there has also intervened in one of his cases, taking up the issue of a bank’s right to foreclose.
In his experience, Mr. Shaev said: “The attorneys who represent the banks invariably state that they will get the collateral file for us and prove that the banks had possession of the documents at the appropriate time. But then when we review the file it doesn’t show that at all.”