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Recently, the Miami Herald did an excellent recap of the impact of Foreclosure Gate on the Florida economy – particularly the South Florida real estate market.  Fraudulent foreclosure practices in Florida (through robo-signing, etc.) have had a detrimental impact upon consumers, investors, lenders, as well as local and state governments.  There doesn’t seem to be an easy answer or a quick turnaround in sight.

However, courts across the country are beginning to find ways to fight Foreclosure Gate’s impact.  And more and more, these judges are focusing their efforts on banks and law firms.

Judges Take Action Against Bad Banks in Foreclosure Fraud Crisis

In Massachusetts this week, the state’s high court ruled against US Bancorp and Wells Fargo in a foreclosure case that is expected to have national impact as other state judges follow their lead.  In their ruling, the Supreme Court affirmed a lower court’s decision to invalidate two foreclosures because the banks failed to prove their ownership of the notes themselves.

Because the financial institutions that foreclosed on the properties could not provide legal documentation to show that they owned the notes upon which the foreclosures were based, they failed to legally foreclose.  The bank that forecloses should be the holder of the note at the time of the foreclosure under Massachusetts law (and this is true in other states, including Florida, as well).

This means that in Massachusetts, two homeowners who thought that they lost their homes have a second chance.  They’ve had a major victory this week (though they will still have to negotiate that mortgage situation).

Meanwhile, over in New Jersey, courts have ordered banks across the board to prove the integrity of their foreclosure proceedings. New Jersey foreclosures were stayed, or temporarily stopped, by most of the big financial institutions last September as New Jersey’s top mortgage lenders were showed to be blatantly foreclosing on homes with at the best inaccurate, and at the worst, fraudulent documentation – which they filed with these same New Jersey courts that now set in judgment of their actions.

And New Jersey isn’t being slow to act.  For example, in order to comply with one New Jersey Court Order, attorneys are now being required to sign “code of conduct” pledges.

Good start, right?  Even better, banks are implementing their own internal codes of conduct for their in-house counsel.  But that’s just the beginning for these renegade attorneys.

Going After the Lawyers – Money Talks.

In New York, state judges are speaking in a language that these lawyers understand: money.  Nassau County District Judge Scott Fairgrieve ordered one law firm to pay over $20,000 in fines and costs last week after the New York State Supreme Court found firm attorney Steven J. Baum’s actions to be “incredible, outrageous, ludicrous, and disingenuous.”  Here, fines are being assessed by the courts against the lawyers for their bad acts; Sanctioning them financially for behavior that is unacceptable.

However, citizens are also going after the Foreclosure Gate attorneys for cash. For example, on the eve of the New Year, a Florida appeals court approved a class action lawsuit against the Law Offices of David J. Stern, which is expected to have thousands of plaintiffs join its ranks as they pursue claims against the Stern Law Firm violations of state debt-collection and deceptive trade laws involving Wells Fargo mortgages and foreclosures.  Since Stern was involved with more than one banking institution, its presumed that this green light will be a hint to similarly situated Stern victims to follow the lead of these plaintiffs in trying to get money out of the lawyer’s pockets.

Stay tuned.  State judges across the country are incensed about rampant foreclosure fraud since these big, bad banks saw fit to foreclose on properties without bothering to insure that state and local laws were followed.  A disrespect that is coming back to bite them.

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