NEW YORK (Reuters) - New York courts are the first in the United States to require lawyers handling foreclosures for banks and servicers to sign a form verifying the procedure has been done properly, the state’s top judge said on Wednesday.
Effective immediately, lawyers representing plaintiffs in residential foreclosure actions must submit affirmations that they took “reasonable” steps to verify the accuracy of the underlying documents.
Regulators, including all 50 state attorneys general, are examining foreclosures after revelations that some paperwork at Bank of America Corp and Ally Financial Inc’s GMAC Mortgage unit was handled sloppily, and perhaps not at all.
Many analysts say defects may cloud titles for thousands of homeowners, and drag the weakened housing market. A few major lenders froze all or some foreclosure proceedings, though Bank of America and GMAC this week set plans to resume them.
Jonathan Lippman, chief judge of the New York State Court of Appeals, said the new rule in New York is in response to “unprecedented revelations” by several lenders of problems in the foreclosure process, including in the notarization and so-called “robo-signing” of documents.
“There is a national crisis,” Lippman said in an interview. “Given the magnitude and consequences of this kind of systemic problem we’re having, we think it behooves lawyers to talk to their clients and make sure the i’s are dotted and the t’s are crossed.”
New York is the third-most populous state, and one of 23 states where court approval is needed to foreclose. Lippman said nearly 80,000 foreclosure actions are pending in the state’s courts.
Stephen Younger, president of the New York State Bar Association, said the group “applauds any effort to preserve and maintain the integrity of the foreclosure process.”
Maryland’s Court of Appeals on Tuesday approved its own measure to improve the integrity of foreclosures, including the appointments of special examiners to screen paperwork.
Lippman said he did not talk with judges in other states before adopting the new rule, and is not planning to impose the rule retroactively.
He also expects no delays in foreclosure proceedings from requiring lawyers to state in writing that they have reviewed the underlying documents.
“Lawyers should be doing this anyway,” he said. “We thought it essential to preserve the integrity of the court process and fix it at the front end, and not to have it bounce back to us to clean up the mess.”
Reporting by Jonathan Stempel; Editing by Steve Orlofsky, Tim Dobbyn and Jackie Frank
Our Standards: The Thomson Reuters Trust Principles.