Faulty foreclosure papers notarized

A foreclosure sign in front of a house in Miami, Fla.


Kai Ryssdal: There have been millions of foreclosures in this country since the recession started. Not all of them on the up and up. In the past couple of weeks, three mortgage lenders have had to stop foreclosure proceedings because the paperwork was questionable at best. State officials have started taking a closer look at what's been happening and, in some cases, calling in the Feds.

One of those officials is Jennifer Brunner. She is the Ohio Secretary of State. Ms. Brunner, thanks for being with us.

Jennifer Brunner:Glad to be here, Kai.

RYSSDAL: In a standard foreclosure, that is, in a legal foreclosure, there are a pile of documents -- they are attested to and signed and everybody knows in theory what's in them. What has your office discovered about what's been happening with a good share of foreclosures these days?

BRUNNER: My office has discovered that there have been a lot of shortcuts taken in notarizing documents that are required for foreclosure. At one financial institution, a group of eight notaries sit at tables and notarize 18,000 documents a month. What was described in the depositions was that the person who is signing the documents doesn't really have knowledge of what is in the those documents. In some situations, I've seen examples where one individual signs 2,000 to 5,000 documents a day with an e-signature.

RYSSDAL: No matter how fast you read, if you're signing 2,500 a day, you're not really sure what's inside those documents.

BRUNNER: I think it would be nearly impossible.

RYSSDAL: So far we've had Ally Financial, we've had JPMorgan Chase and then, just this past Friday, Bank of America, saying that they were going halt foreclosures in some 23 states across the country. It does sort of sound like there are more shoes to drop in this.

BRUNNER: It does. And what's very interesting is that on Sept. 27, Congress very quickly passed House Resolution 3808 (PDF) and it requires that state and federal courts honor notarizations from another state as long as they were lawful in that state. It seemed innocuous at first, but when you really look into it, and you look into what's happening out there with technology and mortgages, and see that there are states with very lax laws and allow for electronic notarization without even presenting in front of a notary. It seems very clear that there an attempt of the banking industry to flank what's being discovered by consumers with a lot of indignation.

RYSSDAL: This is, it seems to me, not to be pejorative, but a paperwork problem, right? We have people not knowing what they were signing, we had notaries doing things if not fraudulently, then out of neglect. It's a corruption of the paperwork, yes?

BRUNNER: It is, except I can't necessarily blame the notaries when you have situations like 18,000 documents processed by the eight notaries in the period of a month. That's a company policy. Those employees are doing what they're told to do. It's a paperwork problem, but it's a bigger problem that an institution that we depend on, that's publicly traded, would think that they can shortcut the laws of the states that they do business in.

RYSSDAL: Is anybody going to get their home back out of any of this?

BRUNNER: That remains to be seen. The home owner who's already been foreclosed upon, who's lost their home, who may go back and discover that it was done improperly, even against the law, would have the ability to file a motion in court under the civil rules to have the court review that case again. So I think it's a little soon in the process to see what the outcome will be, but it would be a good thing for everyone to come clean and everyone to work together to figure out how we can make it through this morass.

RYSSDAL: One of the reasons that capitalism works is because we are able to have faith in a transaction; that the seller has clear title to sell the property, and the buyer will get clear title to buy. That process has been corrupted in real estate in this country, at least in part by some of what's been going on.

BRUNNER: To put it really bluntly, that process has been corrupted by greed.

RYSSDAL: Jennifer Brunner is the Secretary of State of the state of Ohio. Jennifer, thanks very much.

BRUNNER: Thank you Kai.

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I was troubled that the State of Ohio Secretary of State signed off by explaining that the problem arose because of greed. When has greed NOT been a part of an economic transaction? We have regulations to mitigate the impact of greed. The problem is whne we fail to reuglate properly, bad things happen.

Kai Ryssdal had it right. The issue is confidence and trust. When those virtues break down, corruption takes hold, transactions do not occur (or they are reduced) and efficiency (as defined by an economist) suffers.

Economists don't spend enough time analyzing these "externalities" and prefer to imagine that efficiency just happens because transactions occur.

I was diaappointed that Kai did not ask the Secty of State a cheeky quesiton: When did greed cease to be part of economic transactions and when did reoccur in Ohio? When was it safe to live in Ohio?

While it's true that *primary* blame doesn't rest on the notaries, but I had the impression that notaries, like many other "public servants," had their duties defined by statute---if they were given orders that conflicted with their duties, that would be like an accountant being ordered to cover up financial fraud. If nothing else, they should be somewhat liable for not blowing the whistle on this when it began.

I was disappointed in your interview. While I fully agree that a notary must verify not only that the signer is the person whose signature appears thereon, but that the information is sworn-to as true and freely made. I found that you failed to ask the critical question of the Ohio Sec'y of State-was the factual information presented by the affiant false. If not, then the "wrong" is perhaps a technical wrong only. If the certified information is false, then it truly is a fraud on the courts and a reprehensible act. You did not ask that one critical question leaving me to wonder why you played so hard to make the mortgage industry look so cruddy?

This may be a Constitutional violation. From the 5th Amendment: "...nor be deprived of life, liberty, or property, without due process of law...". Surely this action is a subversion of due process.

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