Last week, Thomas Cox, the Maine lawyer who performed the deposition that basically exposed robo-signing, won the $100,000 Purpose Prize for his work on behalf of homeowners at risk of foreclosure. I spoke with Cox this week to get a ground-level picture of what is happening in the courts in the post-settlement landscape. Have banks cleaned up their foreclosure practices? Are homeowners still getting the shaft?
Sadly, Cox told me that very little has changed with regards to foreclosures. “I’m probably biased because I see the hardest cases,” Cox said in a phone interview. “But I see it as different, though not necessarily better.”
Cox, who worked for banks on foreclosure operations before volunteering to help foreclosure victims after his retirement, explained that we’re no more than halfway through the foreclosure crisis in America, and servicers remain completely dysfunctional and not equipped to handle the crush. Moreover, while Cox believes that the mass signing of foreclosure documents by “limited signing officers” with no underlying knowledge of the loan file has generally stopped, he has encountered in his cases in Maine a more subtle problem.
“Now the servicers have litigation departments with specialists,” Cox said. “They are trained as trial witnesses to say certain things in court. But they still don’t have the experience level. The Maine Supreme Court said witnesses had to have personal knowledge of the loan documents, to be intimately involved with the details. These people in these departments are not intimately involved.”
Basically, we’ve moved from robo-signers to robo-witnesses, at least from Cox’ experience.
There has been very little reporting on this rise of the Litigation Department and the proliferation of professional witnesses who go from case to case attesting to the legitimacy of the loan files and veracity of the ownership of the loans. But according to Cox, this has become the industry standard.
Basically, this is a function of a servicer business model that doesn’t allow for a robust staff. Obviously they’re also dealing with a legacy of fraudulent paperwork and errors in mortgage transfers. But even if the loan files were pristine to begin with, servicers at the current staffing level would have problems legally prosecuting foreclosures.
So instead of that, servicers engage in a variety of dilatory tactics to basically prolong the situation and wait out homeowners with limited resources to fight in court. Here’s a perfect example in this video. A family in Maine signed up for four straight forbearance deals with their lender, only to find at the end that a $3,700 charge from a law firm had been tacked onto their loan account. “We ended up in court on this, and the lender stonewalled me on a document request for months,” Cox said. “Finally, the judge dismissed the case with prejudice.”
Servicers and the law firms they hire to carry out this strategy feel like they don’t have to improve this part of their business, which would involve heavier capital expenses, because there are only so many people like Thomas Cox. “Fewer than 10% of all foreclosure victims have legal representation,” Cox said. “If they tie me up in court one time, that’s three other cases they can get away with.” So servicers accept the losses as part of the cost of doing business, while getting 90% of their foreclosure operations through smoothly. Under that standard, they don’t feel any pressure to operate legally, especially since the financial regulatory apparatus at the state and federal level has called off the dogs.
Cox hopes to use the $100,000 prize to “work even harder to feel like I deserve it.” He wants to recruit more retired lawyers into an organization that can collaborate on stopping what he calls an attack on the court system. Cox has also become involved with the Uniform Law Commission, a group started by the Federal Housing Finance Agency to come up with a process for a uniform foreclosure statute, rather than the current patchwork. “Among 50 people at the first meeting, I was the only homeowner lawyer there,” Cox said. “I was the only one who had been in the courtroom on a foreclosure case. The Uniform Law Commission has a budget paid for by Fannie Mae, Freddie Mac, and the New York Fed.” Cox is trying to bring other foreclosure defense lawyers onto the ULC to get some balance in that process.
“It’s deeply frustrating,” Cox said about the continuing abuse of the court system. “I hope we can work to stop it.”