In about half of the U.S. states the law requires a lender to process a foreclosure in a court of law. This involves filing a foreclosure affidavit. A foreclosure affidavit is a written document stating that: 1) the lender owns the loan that is being foreclosed; and 2) the borrower is in default on the loan. The affidavit should include the interest rate on the loan, the balance remaining, as well as the number of payments that the borrower has missed. And, lastly, it should include all of the fees and costs of the foreclosure.

Therefore, a false affidavit in a foreclosure proceeding is an affidavit submitted by a lender which contains false information. For example, in the affidavit, the lender may state that the borrower has missed more payments than in fact the borrower has missed. In addition, the person who completes and signs the affidavit must have personal knowledge of the truth of the information in the affidavit. So, if the affidavit is signed by someone who has not reviewed the loan documentation and history of the loan at issue and does not personally know the truth of the information, the affidavit can be considered false.

Sometimes false representations may be made in an affidavit intentionally. And often they are simply the result of carelessness on the part of the lender and its employees.

Not all states require that foreclosures be prosecuted in a court action. In those states, a declaration is required, rather than an affidavit. However, the same issues apply. A borrower facing foreclosure would want to know what the procedures are in the state in which they live.

Some states that have non-judicial foreclosures, such as California and Washington, also require the bank to contact a borrower personally to discuss options to avoid foreclosure. Or, the bank must declare that it met the due diligence requirements for attempting to contact the homeowner.

The form for these declarations is called a “loss mitigation” declaration, so borrowers in these states should look for these documents and also raise the issue of their lack of validity if they contain errors or misstatements.

What Is “Robo-Signing” in Relation to Foreclosure Affidavits?

The mortgage and foreclosure crisis that began with the Great Recession in 2008 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 large quantities of 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 was called “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 without the borrower being aware that a false affidavit was used in their foreclosure proceeding.

What Is the Legal Effect of a False Affidavit in a Foreclosure Proceeding?

If a false affidavit is presented in a foreclosure proceeding, the lender can face various legal consequences. For example, the foreclosure proceeding may be ended in favor of the borrower.

The lender may even be subject to civil or criminal penalties for submitting a false affidavit to a court. Or, the court may order the lender to compensate the borrower for losses caused by the false affidavit.

What Should I Do If My Bank Used a False Affidavit?

If a person discovers that their bank used a false affidavit or engaged in “robo-signing”, they may have several possible legal remedies.

  • Judicial Foreclosure: In some states, all foreclosures must be processed through a judicial foreclosure proceeding (“foreclosure by judicial sale”) in a court of law. If that is the case in a person’s state, that person 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.

    • Errors in the affidavit can have a negative effect on a borrower’s financial situation. For example, the borrower could be charged incorrect amounts for fees and costs. The amount of the mortgage that the borrower still must pay after the house is sold could be incorrectly high, which would force the borrower to pay more than they really owe. This could have a lasting negative impact on their finances and credit rating. These errors can also undermine a homeowner’s ability to explore alternatives to foreclosure or reinstate their loan.
    • A court will review an affidavit carefully if a homeowner alleges an error. The borrower. can raise a challenge to an affidavit in a judicial foreclosure process as one of their defenses in the foreclosure lawsuit. If the borrower does not challenge the affidavit, the court is not required to investigate its accuracy independently, and the issue may not be addressed. So, again, it is up to the borrower to make sure that the issue is raised in the foreclosure proceeding.
  • File a Lawsuit against the Lender: If a person’s state does not require judicial foreclosure, then that person may have to be proactive and file a lawsuit against their lender. Again, the person has to take the initiative by filing the lawsuit in court; usually a person will need to hire a lawyer to accomplish this; an experienced real estate lawyer would know how to prepare the necessary documents and how to present the case in court.
  • Discuss the False Affidavit with the Lender: Often, a person’s lender-agent may not even be aware of robo-signing practices occurring in their company. If the person alerts their lender to a false affidavit, they may present you with alternatives to foreclosure, such as refinancing at a lower interest rate or extending the life of the loan.
  • Forbearance Agreement: A borrower who would like to stay in their home and could pay something less than the full mortgage payment might get the lender to sign a forbearance agreement. In a forbearance agreement the lender agrees not to foreclose and the borrower agrees to make regular mortgage payments, although in a smaller amount that is manageable for the borrower. The lender would probably rather work with the borrower than risk discussing a false affidavit in court, and the borrower can use that leverage to their advantage.

Finally, a last resort option to avoid foreclosure is to file for bankruptcy. Filing for bankruptcy may help delay foreclosure for a period of time. However, if a person is certain that a false affidavit was used in a foreclosure involving the person’s mortgage loan, the person should consider all options before filing for bankruptcy.

Do I Need a Foreclosure Lawyer?

If you suspect that you have been victimized by a false affidavit or robo-signing, you should contact an experienced foreclosure lawyer immediately. Not all states require a judicial hearing for foreclosures. An experienced foreclosure attorney will be familiar with the laws in your state and can advise you as to the options you have in this situation. A foreclosure attorney may help you use the situation to your advantage to resolve a problem with late mortgage payments.