It turns out that a lot of mortgage servicers haven’t been taking legal process very seriously. Robo-signers are employees whose jobs are to sign their name to as many affidavits as possible without reading them, and robo-signing is all the rage among mortgage servicers these days.
Instead of acknowledging that the mortgage industry created this economic and legal disaster, Treasury Secretary Timothy Geithner wants to blame the Legal Aid attorneys who discovered it was happening.
If the Legal Aid lawyers are shining a flashlight on the dirty underside of the mortgage industry, Geithner wants to cut the power so business as usual can go on as usual. The geniuses behind this move? Why, the mortgage industry, of course.
But what happens if the robo-signing stops? Probably foreclosures screech to a halt, since mortgage servicers probably cannot prove up the paperwork. That’s a huge problem for the economy because it essentially locks up the housing market and pulls the rug out from the already-teetering-on-the-brink mortgage industry. University of Minnesota Law School professors Prentiss Cox and Claire hill propose a possible solution: “bail out” the banks by letting them foreclose with their electronic registry, but force them to swallow an overhauled loan modification program, instead.
Whether or not Cox and Hill have the right answer, Geithner’s solution to the problem—ignoring it—is definitely the wrong one.