Foreclosure investigation to have little impact in Georgia

Foreclosures continue to pile up in Georgia. The state ranked seventh in the nation for foreclosures in the third quarter, according to a report issued Thursday by RealtyTrac. One in every 98 households was involved in some form of foreclosure proceedings, up 8.3 percent from second quarter and up 23.5 percent from the same period a year ago.

Georgia Attorney General Thurbert Baker joined the joint investigation of foreclosures after it was revealed in several out-of-state cases that bank employees falsely swore they had personal knowledge of particular cases. Some bank employees admitted in court to signing hundreds of foreclosure documents without knowing their contents and signatures on some filings were proved to be fraudulent.

Joe Brannen, president and CEO of the Georgia Bankers Association, said Georgia’s system of foreclosure doesn’t require court intervention. Homes are being foreclosed because borrowers are default, not because of faulty paperwork.

Even in out-of-state cases where the banks have been accused of shoddy paperwork, borrowers are not denying default, Brannen said.

“Lenders are taking the best steps to make sure the system is working right,” Brannen said. “[We] need to get foreclosures through the system so that the market can heal. "

Bank of America signaled last week it would suspend foreclosures in all 50 states. JPMorgan Chase, Ally Financial's GMAC mortgage unit, and PNC suspended foreclosure auctions and evictions in many states.

But William Brennan, director of the Home Defense Program of the Atlanta Legal Aid Society, said his group has had at least a dozen instances of banks initiating foreclosures in Georgia when it turned out it didn’t have legal standing to do so.

Often the loans were tied up in complicated securitized mortgage pools.

In Georgia, banks must notify borrowers of their default 30 days before an auction and advertise the foreclosure for four consecutive weeks. The security deed must also be filed with the court before the auction.

“They have to prove they own the mortgage before they foreclose,” Brennan said. But in a dozen or more cases over the past two years, Atlanta Legal Aid stopped foreclosures when it proved an entity didn’t have the legal right to foreclose.

Brennan said he isn’t sure how often lenders haven’t correctly foreclosed statewide, but said it is worth investigating. A moratorium could be used to modify more loans for struggling borrowers.

“If [Bank of America] started by instituting a moratorium on just the judicial states, why expand it then to the entire country unless they were also concerned about improprieties or illegalities in the non-judicial states like Georgia?” he said.

Sylvia Robinson, community outreach manager in Atlanta for HomeFree USA, which assists borrowers facing foreclosure, said in a “handful” of cases, banks have had incomplete paperwork. But in nearly all cases, banks ultimately had the legal right to foreclose.

Denise Griffin, a foreclosure litigator with Shapiro & Swertfeger LLP in Atlanta, said the national documentation issues do not apply to Georgia foreclosure cases. She also said she has not seen any cases of lender improperly foreclosing on borrowers’ loans.

“I have not seen a single incident where a house was foreclosed on by someone who did not own the loan,” she said.

The national firestorm over improper documentation is starting to flood Georgia courts with lawsuits that often do not hold water, Griffin said.

"I’ve not seeing anything like this in 22 years,” Griffin said. “Individuals are filing lawsuits doing Google research and clogging the courts up.”