Lawyers Field Consumer Complaints Over Robo-Signing

Park City, Utah — Lawyers involved in the big banks' robo-signing practices are finding themselves increasingly targeted by angry homeowners.

State bar associations are fielding a larger number of complaints alleging that lawyers have crossed an ethical line for their involvement in the robo-signing scandal, people speaking at an American Bar Association meeting on Monday said. That scandal exploded in 2010, halting some foreclosures, after large mortgage servicers were found to be cutting corners in their execution and use of foreclosure documents.

"Aggressive consumers are filing more complaints with state bar associations," John A. Snow, a litigator at Van Cott, Bagley, Cornwall & McCarthy, P.C., in Salt Lake City, said during a panel discussion on robo-signing. "We've also had complaints against lawyers from notaries for directing non-legal staff to sign documents."

No one has actually tallied how many such complaints have been filed against lawyers nationwide, he said.

Abraham Chandler Bates, an attorney at Wasatch Advocates, LLC, who has represented hundreds of homeowners in foreclosure cases, said during the panel discussion that robo-signing was "limited" to the 23 states where foreclosures are processed through the courts. In non-judicial states affidavits are not filed in court, "so the homeowner doesn't know anything was filed fraudulently," Bates said.

Only a few robo-signers have been prosecuted. Meanwhile, the 14 largest servicers are operating under federal consent orders and are supposed to have changed the widespread foreclosure practices that allowed robo-signing to go on for years.

Attorneys involved in robo-signing can be disciplined under rules of professional conduct, Snow said.

But he added that most lawyers that engaged in robo-signing have simply gone through a legal process known as "noisy withdrawal," in which they withdraw false documents that have been filed in court, and disclaim any all prior acts, without any requirement to disclose the wrongdoing.

After the robo-signing scandal erupted in September 2010, lawyers representing banks in foreclosure proceedings began withdrawing thousands of documents from local courts. They then refiled new documents.

Employees working for mortgage servicers including Ally Financial Inc., Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. have admitted signing thousands of mortgage documents a day, without having personal knowledge of the borrower's finances.