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The New Robosigning

posted by Adam Levitin

First there was robosigning.  Now there's illegal practice of law.  It seems that one of the major Pennsylvania foreclosure mills, Goldbeck, McCafferty & McKeever, was routinely using non-lawyers to do all the paperwork in foreclosure cases without any review by attorneys.  (See here for Yves Smith's take.)   That works in most small claims courts, but raises real problems in a foreclosure context. 

Perhaps related to the apparent lack of attorney oversight, every Pennsylvania foreclosure filing that I've looked at by Goldbeck, McCafferty, & McKeever appears to be facially defective because of a failure to include the note with the complaint.  

Pennsylvania law requires that an action based on a writing include a copy of the writing.  A foreclosure action is necessarily based on two writings--a note and a security instrument.  This means that a well-pleaded foreclosure case in Pennsylvania should include the note, the mortgage, and any assignments thereof as part of the complaint.  (There's even case law on this, not just statute.)  Many Pennsylvania foreclosure filings properly include all of the required writings, but I have never seen any notes included in Goldbeck, McCafferty & McKeever foreclosure filings. 

Pennsylvania law does allow for incorporation by reference of certain public records, which might permit incorporation of the mortgage by reference (I don't read the statute that way, but it's a debatable point and numerous firms seem to rely on this exception for the mortgage, including Goldbeck, McCafferty & McKeever), but the note is virtually never a public record, so it cannot be incorporated by reference.  The fact that a foreclosure is only seeking title to the property, not a monetary award, doesn't change the requirement for submitting the note.  The mortgage can only be enforced if there is a default on the note and the ability to cure depends on acceleration, which is a right granted in the note.  To my eyes at least (and I note that I am not barred in Pennsylvania, although I don't think that matters a lick here), Goldbeck, McCafferty & McKeever is routinely filing defective foreclosure filings.  

The real scandal, I think, is that courts (or really court clerks) aren't tossing out these filings, irrespective of whether the borrower contests.  Some  judges are often reluctant to ensure proper process, especially if there is no pushback from the borrower.  Indeed, one ex-judge, at least, has expressed a really Philistine view that if there's a default on the mortgage, sanctity of contract demands a foreclosure, procedure be damned.  Somehow insisting on procedural rights is borderline unethical.  Never mind that procedure was part of the contract and litigation risk was priced into it.  

Clearly the driving factor behind robosigning and use of non-attorneys to do legal work is the economics of foreclosure litigation.  Law firms are generally paid low, fixed fees per foreclosure. Therefore, the only way to increase margins is to cut cost. This creates a strong incentive to cut corners.  If a job can be done by a lower-cost non-attorney, then it makes sense to use the non-attorney.  If it's cheaper to create a document than pay the document custodian a fee for obtaining the original, then create the document.  

The bottom line here is that we're witnessing a highly automated foreclosure process that is built on economies of scale and cost reduction. It's a brutally efficient machine, and it's grinding human grist


Although your post relates to the UPL lawsuit by Loughren, any discussion of PA firm Goldbeck, McCafferty, & McKeever necessarily should include at least a passing reference to the In Re Hill case. In Re Hill was the U.S. Bankruptcy Court case which precipitated the collapse of Countrywide following Gretchen MORGENSON's January 8, 2008, news story in the New York Times describing Countrywide's "recreated letters" and the release of a transcript of the remarkable hearing of December 20, 2007:





Note that Judge Thomas AGRESTI sanctioned both the law firm Goldbeck, McCafferty, & McKeever, as well as PA attorney Leslie PUIDA by a referal to the PA Supreme Court's Attorney Disciplinary panel just two weeks ago:


Nor was In Re Hill the first occasion when a U.S. Court found it appropriate to sanction GMM and attorney Ledlie PUIDA. Consider the Bankruptcy Court’s In Re Ennis decision from 2006:


It is noteworthy that In Re Ennis was another Countrywide case.

"Grinding human grist?" I have no problem with a criticism of foreclosure firms that don't follow the rules or courts that think that the rules do not matter. And the argument that procedure and rules should be followed, despite the fact that a homeowner is in default, is sound. But hyperbole doesn't help make that case.

Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers

Although increasing numbers of courts are continuing to reject improper and fraudulent foreclosures, the Congressional Foreclosure Panel examination of mortgage services and foreclosure practices did not include foreclosure lawyers.

Foreclosure lawyers are officers of the court; knowledge of applicable laws and civil procedure is not required from mortgage lenders, nor loan servicers. In states that require judicial foreclosures, lawyers are the ones who file lawsuits to seize and sell property; and lawyers are responsible for filing and recording foreclosure property deeds.

An investigation could prove helpful to sorting out whether improper and illegal foreclosure proceedings are linked to any self-dealing conduct disadvantaging lenders, investors, homeowners, and city governments.

Inadequate or questionable foreclosure can lead to useless property deeds that impede real estate sales. Increasing numbers of title insurance companies are refusing to cover foreclosed properties; and certain mortgage default claims, are being denied because of defective foreclosure proceedings. EXAMPLES:

–Deliberately utilize defunct lenders or lenders without “standing” to intentionally execute false foreclosure proceedings in civil as well as bankruptcy courtrooms.
– Create and conceal malpractice, delaying foreclosures, engineer various litigations to generate billable legal fees.
– Orchestrate sham foreclosure auctions; property never becomes acquired by lenders, but by 'straw buyers’
– Commit wrongs which are actionable (unfair debt collection, fraud, various torts) that give rise to lawsuits from property owners,
– Engage in self-dealing foreclosures by which some lawyers gain for themselves foreclosed properties
–Foreclosures via names of defunct lenders allow ’straw buyers’ illegally convey property deeds, flip real estate, and create blighted communities
– Unconscionably create false deficiency judgments against property owners after straw buyers acquire homes for pennies on the dollar
– Intentionally file Bankruptcy court “Motion to Lift” and “Proof of Claim” on behalf of NON-EXISTENT lenders, concealing fact of “non-secured” mortgage debt.
–Involved in fraudulent collection of property damage and mortgage insurance for illegally foreclosed homes
–Fraudulent foreclosures abet loss of property taxes to city revenue, rodents, vagrants, and blight. – Thousands of families are being made unlawfully homeless, scores of homes have been fraudulently flipped and communities are blighted from null foreclosure proceedings.


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