Tuesday, August 30, 2011

Federal Appeals Court Reinstates Reversed Ruling Hammering Foreclosure Mill For Littering Courtroom With Robosigned Docs; Bankruptcy Judge Vindicated

In Philadelphia, Pennsylvania, Dow Jones Daily Bankruptcy Review reports:

  • A federal appeals court has reinstated sanctions against a New Jersey law firm and attorney for attempting to foreclose on a suburban Philadelphia couple using "robo-produced" mortgage data that was fraught with errors.(1)

  • In a case that was one of the first to expose trouble in the high-tech, high-volume mortgage foreclosure industry, the Third U.S. Circuit Court of Appeals sided with a bankruptcy judge who punished the Udren law firm and attorney Lorraine Doyle for showing up in court with unverified, computer-generated mortgage data that was wrong.


  • The Udren case highlights the role of foreclosure law firms, whose lawyers walk the robo-produced mortgage data into court, without checking whether it is correct or not. The law firm said it was not able to verify the data under the system established by client HSBC, using technology from Lender Processing Services Inc.


  • The appeals court and the bankruptcy judge found the flawed high-volume system that handles mortgage data does not excuse an attorney's failure to verify information before presenting it to a court.

  • "Where a lawyer systematically fails to take any responsibility for seeking adequate information from her client, makes representations without any factual basis because they are included in a 'form pleading' she has been trained to fill out, and ignores obvious indications that her information may be incorrect, she cannot be said to have made reasonable inquiry," the court of appeals wrote.


  • The case began in January 2008, when the Urden firm presented a bankruptcy judge with the wrong mortgage note, wrong monthly payment information and wrong value for the home of Niles and Angela Taylor, and sought permission to foreclose.


  • The decision is a vindication for Judge Diane Weiss Sigmund, a veteran bankruptcy judge who became irritated when a young attorney sent to court by the Udren firm couldn't answer basic questions about the Taylor's Loan and couldn't get an answer from the client.

  • She summoned the firm and others to answer for falsehoods about the status of the Taylors' mortgage and wrote a detailed opinion about the technology-heavy system that made it impossible to pin down and correct errors.

  • A district court judge overturned her ruling, saying Sigmund was more concerned about "sending a message" to the foreclosure firms than seeing justice done in the Taylor case.(2) The appeals court disagreed, finding her detailed conclusions were supported by the evidence.

  • It's also a victory for the U.S. trustee's office, an arm of the Department of Justice that monitors the bankruptcy courts. The bankruptcy watchdogs appealed the district court decision overturning the sanctions, noting that the sanctions imposed were "lenient," and educational in nature. The Udren firm and Doyle were not fined.

For the story, see Appeals Court Restores Sanctions Against Foreclosure Law Firm (may require paid subscription; if no subscription, TRY HERE).

For the ruling of the 3rd Circuit Court of Appeals, see In Re Taylor, No. 10-2154 (3d Cir. August 24, 2011).

(1) It should be noted that the appeals court did, in fact, sustain the reversal of the sanctions originally imposed on one of the attorneys involved, Mark J. Udren.

(2) For Judge Sigmund's original 58-page ruling, see In re Taylor, 407 B.R. 618 (Bankr. E.D. Pa. 2009).

See also, Data Management Firm, Assembly Line Law Firm Scorched By Scathing Court Ruling That Shines Light On Filing Screw-Ups In Consumer Foreclosure Cases.

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