EAST PATCHOGUE, N.Y. - A year ago, Long Island Judge Jeffrey Spinner concluded that a mortgage company's paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so "repugnant" that he erased the family's $292,500 debt and gave the house back for free.
The judgment in favor of the homeowner, Diane Yano-Horoski, which is being appealed, has alarmed the nation's biggest lenders, who say it could establish a dramatic new legal precedent and roil the nation's foreclosure system.
It is not the only case that has big banks worried. Spinner and some of colleagues in the New York City area estimate they are dismissing 20 to 50 percent of foreclosure cases on the basis of sloppy or fraudulent paperwork filed by lenders.
Gasp! So Big Mortgage is "alarmed"over judges being judges and actually ruling in favor of wrongly foreclosed upon homeowners? Shouldn't they be "alarmed" that they haven't faced criminal prosecution at this point?
The foreclosure dismissals in this area of New York have not delivered free homes for borrowers. With so much at stake, lenders in this part of New York are aggressively appealing foreclosure dismissals, which is likely to keep the legal system bogged down, foreclosed homes off the market, and homeowners like the Yano-Horoski family in legal limbo for years.
"We believe the Yano-Horoski ruling, if allowed to stand, has sweeping and dangerous implications for the entire mortgage lending industry," said OneWest Bank, the family's mortgage servicer.
You got that right. The "dangerous implication" being that the mortgage industry might finally be facing its comeuppance, at least in New York anyway. And the list of fraudulent foreclosures is endless.
"We can't have the process being a fraud," New York State Chief Judge Jonathan Lippman said in announcing the new procedure. "It has to be real and based on credible information."
Even before Lippman's order, however, lower court judges were already raising questions about faulty paperwork in foreclosures.
On June 17, for example, Judge Karen Murphy of Nassau County ruled that Wachovia Bank lacked standing to foreclose on a home because the document used to prove ownership of the mortgage was incomplete.
On Sept. 21, Judge Peter Mayer of Suffolk County delayed a foreclosure by Ally Financial's GMAC mortgage unit after noticing that the paperwork transferring the mortgage to the bank was dated two days after the foreclosure was initiated.
And on Oct. 21, Judge Arthur Schack of Kings County dismissed a OneWest foreclosure motion because the bank had not adequately documented how the mortgage had been sold and resold to investors. He also questioned why the employee who signed many of the documents claimed to be a vice president of several different mortgage companies at the same time.
::The Sound of Crickets Chirping::
As the evidence continues to mount of the massive fraud and crime being perpetrated on American homeowners, expect the push back by Big Banking and Big Mortgage to be fierce.
We can also hope the American public begins to finally wake out of its post-recession stupor and realize that most people losing their homes aren't deadbeats who are unemployed. Most are the victims of crime, plain and simple.
"People thought people who didn't pay their mortgages were automatically deadbeats," said Diane Yano-Horoski. "People are educated now. They are realizing all of a sudden how many hundreds of thousands of these homes that were foreclosed may have been done so with fraudulent documents."