Is it "just" a technicality if a mortgage servicer, foreclosing on a borrower who in all likelihood has defaulted, creates documents to prove the servicer’s client acquired the loan years ago?

Consider this (admittedly imperfect) analogy: is it just a technicality if a criminal wasn’t read his rights before being arrested? If we know such a person is guilty, it fair to say that such a person was "not harmed" by the police officer’s procedural misstep? Is it worse to violate his constitutional rights or let him back out on the street?

You can hear echoes of that age-old friction between due process and the messy, often infuriating results of honoring it, in reader reactions to American Banker’s recent story about servicers backdating paperwork to support foreclosures. 

One reader, for example, took umbrage with a Bank of America spokeswoman’s comment that retroactive mortgage assignments are simply "procedural steps" to prove to a court that a trust has the right to foreclose on a borrower.

This commenter noted that Bank of America has, in at least one highly publicized instance, tried to foreclose on a home that had no mortgage at all, let alone one with B of A. 

"Why should we assume that that they are correct when they allege that New Century wanted to assign a particular mortgage to Deutsche Bank as part of complex securitization deal executed 5 years ago?" this reader asked. "This is the danger of skipping those pesky 'procedural steps' long ago. I am sure they saved money by not carefully making and recording assignments at the time they were meant to occur. Unfortunately, it is not only the banks who are now paying for this. Homeowners with clouded titles are paying too. Procedures matter."

Other commenters cited our country’s foundational legal principles of rule of law and equal protection under it: "Nobody is above the law and banks certainly can't be an exception to this basic constitutional principle. You can’t go to court with forged and fabricated evidence to support your claim," wrote one reader. Another said: "Private property and the right to it are core to our economic system. The burden to take it SHOULD be high and the standards of evidence should be strict."

On the other hand, some readers pointed out that delaying or invalidating foreclosures because the lender didn’t take all the correct steps when they were supposed to can result in another type of injustice: Namely, people living for free, for months or years, in homes they never could have afforded, arguably an affront to families who scrimp and save to pay their mortgages. 

"I think a good article in the future would be to highlight, and personally name, those attorneys who clog up the court system with erroneous technicalities knowing their client is responsible for the repayment of the money they freely borrowed using their home as collateral," wrote one reader.

Another commenter on this end of the spectrum, while acknowledging that "people who get wrongfully foreclosed are deserving of the full protection of the law," immediately added: "People who continue to pay their loans even though they are underwater with no hope of getting any equity back deserve something too, just for being great citizens. But if your biggest problem is that your lender signed an assignment of your loan from the seller pursuant to a power of attorney confirming that sale after the fact...., you have no legal or moral claim to anything."

Readers in this second group took issue with the story’s use of the verb "fabricate" to describe the act of creating a paper trail in 2011 to document loan sales that took place in 2005 or 2006.

"Most sophisticated mortgage loan sale agreements have a power of attorney provision that expressly permits the buyer to sign assignments and other instruments of transfer on behalf of the seller to effectuate the agreement's intent post closing," one reader in this camp wrote. "The purpose of such powers of attorney is to address the kind of issues that can be problematic in the future; i.e., something was missed back at the time of closing and now the seller has been sold, gone out of business, is tough to work with or no longer has good records etc."

But another reader countered that even with a power of attorney, "fabrication" is an appropriate term in certain instances – "if documents are backdated, include descriptions of events and actions that did not take place, are executed by individuals under titles they do not hold, etc." 

As our story showed, that last scenario is actually going on; for example, this mortgage assignment was signed by an employee of American Home Mortgage Servicing, but she signed the documents as an officer of the defunct Sand Canyon Mortgage.

The story won kudos throughout the blogosphere. Reuters’ Felix Salmon called it "a fantastic piece of reporting" and Columbia Journalism Review’s Ryan Chittum lauded the writing as "straightforward and tough."

What do you think about the questions the piece raised? Is it worth delaying a bottoming-out of the housing market, and allowing some delinquent borrowers to freeload for a time, in order to prevent the rare but documented instances of someone being wrongly foreclosed on? Procedure matters, but does procedure in this case trump outcome? Share your thoughts by leaving a comment below. 

BankThink: Procedures Matter in Foreclosure; Do Outcomes Matter More?
By Marc Hochstein
Is it “just” a technicality if a mortgage servicer, foreclosing on a borrower who in all likelihood has defaulted, creates documents to prove the servicer’s client acquired the loan years ago?
Consider this (admittedly imperfect) analogy: is it just a technicality if a criminal wasn’t read his rights before being arrested? If we know such a person is guilty, it fair to say that such a person was “not harmed” by the police officer’s procedural misstep? Is it worse to violate his constitutional rights or let him back out on the street?
You can hear echoes of that age-old friction between due process and the messy, often infuriating results of honoring it, in reader reactions to American Banker’s story about servicers backdating paperwork to support foreclosures. 
http://en.wikipedia.org/wiki/Due_process
http://www.americanbanker.com/issues/176_170/robo-signing-foreclosure-mortgage-assignments-1041741-1.html?BCnopagination=1
One reader, for example, took umbrage with a Bank of America spokeswoman’s comment that retroactive mortgage assignments are simply “procedural steps” to prove to a court that a trust has the right to foreclose on a borrower.
This commenter noted that Bank of America has, in at least one highly publicized instance, tried to foreclose on a home that had no mortgage at all, let alone one with B of A. 
http://abcnews.go.com/Business/bank-america-sued-foreclosing-wrong-homes/story?id=9637897
“Why should we assume that that they are correct when they allege that New Century wanted to assign a particular mortgage to Deutsche Bank as part of complex securitization deal executed 5 years ago?” this reader asked. “This is the danger of skipping those pesky ‘procedural steps’ long ago. I am sure they saved money by not carefully making and recording assignments at the time they were meant to occur. Unfortunately, it is not only the banks who are now paying for this. Homeowners with clouded titles are paying too. Procedures matter.”
Other commenters cited our country’s foundational legal principles of rule of law and equal protection under it: “Nobody is above the law and banks certainly can't be an exception to this basic constitutional principle. You can’t go to court with forged and fabricated evidence to support your claim,” wrote one reader. Another said: “Private property and the right to it are core to our economic system. The burden to take it SHOULD be high and the standards of evidence should be strict.”
On the other hand, some readers pointed out that delaying or invalidating foreclosures because the lender didn’t take all the correct steps when they were supposed to can result in another type of injustice: Namely, people living for free, for months or years, in homes they never could have afforded, arguably an affront to families who scrimp and save to pay their mortgages. 
“I think a good article in the future would be to highlight, and personally name, those attorneys who clog up the court system with erroneous technicalities knowing their client is responsible for the repayment of the money they freely borrowed using their home as collateral,” wrote one reader.
Another commenter on this end of the spectrum, while acknowledging that “people who get wrongfully foreclosed are deserving of the full protection of the law,” immediately added: “People who continue to pay their loans even though they are underwater with no hope of getting any equity back deserve something too, just for being great citizens. But if your biggest problem is that your lender signed an assignment of your loan from the seller pursuant to a power of attorney confirming that sale after the fact...., you have no legal or moral claim to anything.”
Incidentally, readers in this second group took issue with the story’s use of the word “fabrication” to describe the creation of a paper trail in 2011 to document loan sales that took place in 2005 or 2006.
“Most sophisticated mortgage loan sale agreements have a power of attorney provision that expressly permits the buyer to sign assignments and other instruments of transfer on behalf of the seller to effectuate the agreement's intent post closing,” one reader in this camp wrote. “The purpose of such powers of attorney is to address the kind of issues that can be problematic in the future; i.e., something was missed back at the time of closing and now the seller has been sold, gone out of business, is tough to work with or no longer has good records etc.”
But another reader countered that even with a power of attorney, fabrication is an appropriate term in certain instances – “if documents are backdated, include descriptions of events and actions that did not take place, are executed by individuals under titles they do not hold, etc.” 
As our story showed, that last scenario is actually going on; for example, this mortgage assignment was signed by an employee of American Home Mortgage Servicing, but she signed the documents as an officer of the defunct Sand Canyon Mortgage.
http://cdn.americanbanker.com/media/pdfs/083111HopkinsMortAssign.pdf 
Incidentally, the story won kudos throughout the blogosphere. Reuters’ Felix Salmon called it “a fantastic piece of reporting” and
Columbia Journalism Review’s Ryan Chittum lauded the writing as “straightforward and tough.”
 http://blogs.reuters.com/felix-salmon/2011/09/01/mortgage-servicers-still-lying-in-court/
http://www.cjr.org/the_audit/the_foreclosure_scandal_contin.php
What do you think about the questions the piece raised? Is it worth delaying a bottoming-out of the housing market, and allowing some delinquent borrowers to freeload for a time, in order to prevent the rare but documented instances of someone being wrongly foreclosed on? Procedure matters, but does procedure in this case trump outcome? Share your thoughts by leaving a comment below.