Robo-Signing Scandal Exposes Systematic Foreclosure Fraud by Major Banks

Bank of America announces a nationwide halt to foreclosures after revelations that employees signed thousands of foreclosure affidavits without reviewing the underlying documents, a practice dubbed “robo-signing.” The scandal exposes systematic fraud in the foreclosure process, with banks mass-producing false legal documents to expedite evictions of homeowners who may have had valid defenses.

Depositions reveal the industrial scale of the fraud. GMAC employee Jeffrey Stephan testifies he signed 10,000 foreclosure affidavits per month without reading them. Bank of America employees describe “assembly line” signing sessions. Documents purportedly notarized in different states bear identical signatures. Banks backdated mortgage assignments to cover breaks in the chain of title created when loans were securitized. In some cases, banks foreclosed on homeowners who were current on payments or had never had mortgages with the foreclosing bank.

The scandal temporarily halts foreclosure processing as all 50 state attorneys general launch investigations. However, the eventual resolution demonstrates prosecutorial capture. Rather than criminal charges for document fraud and perjury, regulators negotiate the $25 billion National Mortgage Settlement in 2012, which provides immunity for the banks. Most settlement “relief” comes in the form of loan modifications that banks claim credit for regardless of whether modifications help homeowners. No senior bank executives face criminal prosecution for overseeing systematic fraud. Foreclosures resume within months, and an estimated 10 million Americans ultimately lose their homes to foreclosure during the crisis, many through fraudulent processes that courts prove unwilling or unable to remedy.