In a foreclosure proceeding, about half of the U.S. states require the lender to file for the foreclosure in court. This involves filing an affidavit. A foreclosure affidavit is a written document stating that: 1) the lender actually owns the loan connected with the foreclosure; and 2) the borrower is actually in default on the loan.
Therefore, a false affidavit in a foreclosure proceeding is where the lender submits false information on an affidavit. For example, in the affidavit, the lender may state that the borrower is in default, whereas in reality they may not be in default. These false representations may happen intentionally, though they are usually the result of carelessness or negligence on the part of the lender.
The recent mortgage and foreclosure crisis led to a sharp increase in the number of judicial foreclosure proceedings. This increase in the number of foreclosures also meant that banks and lenders needed to prepare more affidavits for judicial hearings. It was recently discovered that many affidavits prepared by lenders were not actually reviewed, and were signed without the employee even verifying that the information was true.
This practice was termed “robo-signing,” due to the robotic, systematic practice of signing all affidavits without even conducting research into the truth of the claims. Bank employees who engaged in such practices were called “robo-signers.” This had gone on for some time, often times without the borrower being aware that the false affidavit used in their foreclosure proceeding.
If a false affidavit was used in a foreclosure proceeding, the bank or lending company can face various legal consequences. For example, the foreclosure proceeding may be terminated in favor of the borrower. The lender may even have to face civil or criminal penalties for submitting a false affidavit to a court. For example, they may have to pay a criminal fine, or they may be required to compensate the borrower for losses caused by the false affidavit.
If you discover that your bank used a false affidavit or engaged in “robo-signing”, you may have several legal remedies available to you:
- Judicial Foreclosure: In some states, all foreclosures must pass through the court system in a judicial foreclosure proceeding (“foreclosure by judicial sale”). If that is the case in your state, you can raise the issue of a false affidavit at the beginning of the judicial foreclosure hearing. The court will then conduct an investigation into the falsity of the affidavit
- File a Lawsuit against the Lender: If your state does not require judicial foreclosure, you may be responsible for filing a lawsuit against your lender. You will have to take initiative by filing the lawsuit in court; a lawyer can help you do this and can help you present evidence of the false affidavit
- Discuss the False Affidavit with your Lender: Oftentimes, your lender-agent may not even be aware of robo-signing practices occurring in their company. If you alert your lender to a false affidavit, they may present you with alternatives to foreclosure, such as refinancing or reducing principal, payments, or interest rates. Your lender would probably rather work with you than risk discussing a false affidavit in court
Finally, a last resort option to avoid foreclosure is to file for bankruptcy- this may help delay foreclosure for a period of time. However, if you’re certain that a false affidavit was filed against you, be sure to consider all your options before filing for bankruptcy.
If you suspect that you have been victimized through a false affidavit or robo-signing, you should contact a real estate lawyer immediately. Not all states require a judicial hearing for foreclosures. An experienced real estate attorney will be familiar with the laws in your area, and can help you file a lawsuit to recover your losses.