Robo-Signing and Settlement Conferences Among Issues Addressed in Recently Published Best Practices Guide
In mid-October 2010, media swarmed with news that some of the country’s largest mortgage lenders had engaged in the “robo-signing” of foreclosure documents. Several employees of national lenders such as Chase and Wells Fargo admitted to signing as many as 10,000 documents a month, often without reading the documents or verifying the accuracy of their information.
In response to this controversy, and in an effort to guide trial courts in handling future mortgage foreclosure filings, the Division of State Court Administration convened a task force composed of trial judges, academics, Supreme Court and Attorney General staffers, settlement conference facilitators, and creditor and debtor advocates. This task force was charged with drafting and promulgating a “best practices” document to serve as an advisory manual to trial judges with mortgage foreclosure jurisdiction.
After meeting several times, the task force created a list of approximately 20 recommendations relating to mortgage foreclosure complaints, settlement conferences, notice to borrowers, the imposition of sanctions, and post-judgment actions.
The majority of these best practices address the pleading standards of mortgage foreclosure complaints. To alleviate some of the potential problems associated with robo-signed documents, it is recommended that courts require each mortgage foreclosure plaintiff to verify that it qualifies as a “party entitled to enforce” the mortgage note. These plaintiffs must also verify that the original mortgage note can be produced if requested by the court.
Several best practices relate to mortgage foreclosure settlement conferences, and were drafted based on observations made during the first year of the Supreme Court’s Mortgage Foreclosure Trial Court Assistance Project (MFTCAP). A request has been made that trial courts send a single-sheet notice advising all defendants in mortgage foreclosure actions of their right to a settlement conference. This is one minor change could lead to considerably higher settlement conference request rates across the state. The MFTCAP’s pilot courts in Allen, Marion, and St. Joseph counties have seen settlement conference request rates increase from approximately 5 percent to more than 40 percent as a result of similar outreach efforts.
The issue of sanctions—against both plaintiffs and defendants—is also addressed. Several pilot county judges have assessed sanctions as high as $2,500 against mortgage foreclosure plaintiffs who have refused to comply with court directives or who have asked defendants to waive their right to a settlement conference. Defendants who fail to fulfill court requests may be perceived as having waived the right to a settlement conference, and the foreclosure case is permitted to proceed. Monetary sanctions collected in these cases have been remitted to the Indiana Housing and Community Development Authority to help fund the MFTCAP’s pilot projects.
On January 3, 2010, the Mortgage Foreclosure Best Practices were posted to the Supreme Court’s website and distributed to all Indiana trial judges. Later that day, the Office of the Indiana Attorney General filed a petition with the Supreme Court to adopt these best practices as requirements for all foreclosure proceedings. The petition submitted by the Attorney General includes an additional recommendation that foreclosing plaintiffs should verify that they have engaged the defendant in loss mitigation efforts.
Even without Supreme Court action, Indiana’s largest creditors’ rights firm has reported that it is already complying with each of the recommendations put forth by the task force.