Wells Fargo Joins GMAC In Yanking Homes From The Foreclosure Docket; Begins To Take 'Sloppy Paperwork' Issue More Seriously

The Wall Street Journal reports:

• Wells Fargo & Co. said on Wednesday that it has begun dismissing an unspecified number of pending foreclosures in Maryland as a result of potential flaws in its document-handling practices. The disclosure came after GMAC Mortgage Corp, a unit of Ally Financial Inc., told a Maryland court on Friday that it would similarly dismiss around 250 pending foreclosures in the state in order to avoid a potentially lengthy class-action lawsuit.

***

• Wells Fargo said it began to request dismissals of foreclosures in late December on all loans that had a foreclosure affidavit signed by a Wells Fargo employee. Paperwork signed by outside foreclosure attorneys wouldn't be affected. The bank didn't say how many foreclosures might be affected.

***

• The action represents the latest fallout from the mortgage industry's use of robo-signers and illustrates the risk to banks that their potentially sloppy paperwork invites further lawsuits, slowing the foreclosure process. In other states, banks have moved to simply replace flawed affidavits with corrected ones rather than voiding and refiling foreclosures, which can be more expensive and time consuming.

• Anthony DePastina, a lawyer at Civil Justice, the Baltimore legal nonprofit group that represents the homeowners, says banks may ultimately face similar actions in other states. "This could lead to a cascade event," he said in an interview Tuesday.

• Because the dismissals involve only foreclosures that haven't yet been sold, the remedy doesn't necessarily resolve potential problems with properties that have already been sold to third parties.

• Maryland doesn't require banks to conduct foreclosure proceedings through courts, but unlike other nonjudicial states, Maryland requires banks to go back to court and confirm completed foreclosure sales. The state also makes it easier for homeowners to challenge those foreclosures in court before the property is sold.

For the story, see Wells Fargo to Refile Some Foreclosures in Maryland (may require paid subscription; if no subscription, GO HERE, then click appropriate link for the story).