A while back, the Chief Judge in the State of New York issued an order that was a commonsense approach to robo-signing. He ordered each lawyer representing a foreclosing bank to submit an affidavit about their own investigation of their own case and the reliability of the documents they were presenting to the court. He ordered that no case could proceed until this affidavit, which would make the lawyer liable for sanctions and perjury if falsely issued, was filed with the court.
It was a great idea, though bank lawyers have resisted doing it and lower court judges have, self destructively in my opinion, been lax about enforcing it. Had they been strict in enforcement their clogged docket would be much emptier, I assure you.
Now in the wake of the sellout 49 state AG settlement, Judge Lippman has once again leapt into the breach caused by the utter failure of prosecutors to do their jobs on foreclosure fraud, and has set up a program that may actually help keep homeowners in, you know, their homes. What a concept.
The NYTimes is reporting that Judge Lippman has set up a plan whereby the banks will supply an actual executive, one with authority to modify mortgages, to court where judges will preside over settlement negotiations between the banks and the homeowners. Not exactly cramdown, but a hell of a lot more than the AG’s got.
The New York plan includes an unusual agreement by four banks to send representatives to court who can approve loan modifications. Mortgage settlement conferences have often been paralyzed by repeated requests for information and the absence of anyone with authority.
The Plan is set to begin in Queens County in the spring, and if successful, will expand to the rest of the NYC and the surrounding counties and eventually the rest of the state. The four participating banks are Bank of America, Wells Fargo, Chase and CitiBank. Settlement conferences currently are presided over by court attorneys who lack the power to punish banks who refuse to bargain in good faith or who show up unprepared. The new system will put these conferences in front of judges who have the power to punish the bank, the individual sent by the bank, and/or the lawyer representing the bank.
All of these powers existed before, but the system was not set up to use them. This reorganization, and Lippman’s coup in getting the banks to agree to send someone with settlement authority, should empower lower court judges to get meaningful settlements done.
As with the previous innovation by Judge Lippman, a big factor in its effectiveness will be whether the lower court judges are wise enough to follow his lead and enforce these rules and policies with vigor and gusto.