No Excuses For Sloppy Mortgage Foreclosure Practices

President Obama’s Financial Fraud Enforcement Task Force strikes again! The task force was assembled to wage an aggressive, coordinated, and proactive efforts to investigate and prosecute financial crimes. Personally, I think there are too many “force”s in the interagency’s title. Perhaps it works in their favor, because this week the force is strong!

On October 6, 2011 the United States entered into an agreement with the law firm of Steven J. Baum, P.C., which just so happens to be one of the largest volume mortgage foreclosure firms in the state of New York, to pay $2 million to the U.S. and to extensively change its practices in respect to mortgage foreclosure actions.

After an investigation into the firm it was found that misleading pleadings, affidavits and mortgage assignments were filed in state and federal courts.

Henceforth, Baum’s law firm has specific prohibitions in their engagement in certain practices relating to the Mortgage Electronic Registration Systems (MERS). MERS members contractually agree to appoint MERS as their agent on all mortgages they register. Until recently, employees of the Baum law firm, with the consent of MERS, had been assigning mortgages on behalf of MERS, even though they had no connection to MERS whatsoever, which resulted in errors in its legal filings in state and federal court. Pursuant to the Agreement, Baum is prohibited from executing any assignment of a mortgage as an “officer” or “director” of MERS.

Other changes that Baum’s law firm will have to undergo include the following:

  • Take steps to inform courts of the nature of the assignments in pending foreclosure proceedings it is handling;
  • Obtain appropriate affidavits from its clients attesting to the fact that they possess original notes or have conducted a diligent search and the original note could not be found;
  • Have experienced attorneys supervise the preparation of pleadings, and review and approve pleadings before they can be filed;
  • Implement a 12-24 month training program for its attorneys that includes an overview of the foreclosure process in New York State and a review of the litigation procedures expected at BAUM;
  • Provide immediate notice to the Government when objections are raised regarding the accuracy of certain court filings related to mortgage foreclosure proceedings; and
  • Maintain documentation of its compliance with the settlement.

Baum is also obligated to pay the aforementioned $2 million in exchange for a release from any potential claims pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). The release from liability does not preclude any other parties, including individual homeowners, from pursuing any rights they may have.

Manhattan U.S. Attorney Preet Bharara said: “In mortgage foreclosure proceedings, there are no excuses for sloppy practices that could lead to someone mistakenly losing their home. Homeowners facing foreclosure cannot afford to have faulty paperwork or inadequate evidence submitted, and today’s agreement will help minimize that risk” – Source.