April 18, 2011
Bankruptcy Judge Takes Mortgage Lenders to Task
Gretchen Morgenson of the New York Times reports that Judge Elizabeth W. Magner, a bankruptcy court judge in the Eastern District of Louisiana, has had enough with sloppy mortgage lenders and their foreclosure processes. On April 7, Judge Magner issued an opinion related to a case in which Lender Processing Services tried to foreclose on a couple who was current on a workout plan approved by the court in 2007. Oops.
Morgenson explains the case background:
The first problem arose when the Lender Processing software was not updated to reflect that the Wilsons were operating under a payment plan approved by a bankruptcy court. Then, the couple’s checks were not posted to their account by a lawyer for their lender, who inexplicably held onto the checks.
Says Judge Magner:
ONE too many times, this court has been witness to the shoddy practices and sloppy accountings of the mortgage service industry. With each revelation, one hopes that the bottom of the barrel has been reached and that the industry will self correct. Sadly, this does not appear to be reality.
It looks to me like Lender Processing Services and a certain lawyer are going to face some serious consequences. Here are a some quick practice tips, (hopefully) as a refresher:
(1) DO NOT deposit checks that are not yours into your account. Commingling, in case you may have forgotten, is still bad. Very bad.
(2) DO deposit checks you receive for clients in the appropriate account. Holding on to money that isn't yours, is also bad, and will cause serious problems for your client, which will eventually be a serious problem for you.