Robo-signing Scandal Goes Back to the ‘90s

It’s now becoming evident that the “robo-signing” scandal isn’t confined to the foreclosure glut beginning in 2007. Counties around the country are now finding that illegal or questionable mortgage paperwork is rampant on mortgages dating all the way back to the 1990s.
The robo-signing problem is delaying foreclosures in most states, and it’s also keeping the states from settling with banks on damages, as the inspection of records is turning up far more problems, going far into the past, than were anticipated. While it was thought that robo-signing was limited to affidavits that attested to the validity of mortgage documents, it’s turning out to be far more involved.

County deed registrars have been scrutinizing paperwork as a part of this investigation and negotiation with the banks. They’re finding that it isn’t just affidavits signed without actual verification of the documents they attest to. It’s also improper notarizations, and multiple same-name signatures obviously signed by different people on all types of mortgage documents.

- One Massachusetts county found that more than 25,000 documents had suspect signatures as far back as 1998.

- In Michigan, three companies have received criminal subpoenas issued by the state attorney general after 24 local recorders of deeds found rampant robo-signing.

- Kankakee County, Illinois pulled a random sample of 60 documents dating back to 2007. Every single one was signed by individuals already identified as robo-signers.

Most of the problems seem to date back to the late 1990s, the beginning of the housing boom, and when many lenders began to outsource their mortgage paperwork. This coincided with the rapid growth of mortgage-backed securities sold in packages to investors. It is being found that many documents were stamped by notaries, but the signer wasn’t present, nor was their identity verified.

For real estate investors, it’s just more “buyer beware” strategy. Work with a good title company, as they’re going to issue title insurance, and they will be thorough in trying to lower their liability for claims resulting from robo-signing.