A recent survey of 382 San Francisco foreclosures found irregular documents or other “suspicious activities” in 99 percent of the cases and “at least one clear violation” of state law 84 percent of the time, San Francisco Assessor-Recorder Phil Ting said Wednesday.
The report — which Ting commissioned and called the first of its kind in the state — audited 382 San Francisco homes that went through foreclosure between 2009 and 2011. Regardless of whether the homes were rightly or wrongly foreclosed upon, Ting said, the system is not functioning properly for county officials, the mortgage industry and consumers.
“It may not be a violation of the law, but it’s very odd when you submit documents that are backdated two years prior, and they are submitted on behalf of organizations that no longer exist,” Ting said.
The report was prepared for Ting by the mortgage investigation firm Aequitas. Among the irregularities it identified were the routine backdating of mortgage documents, false claims of beneficiary status by lenders, substitution of the trustee on deeds, and trust assignments from new lenders rather than receiving such assignments from the lender of record.
“We hope to open a dialogue on the importance of ensuring compliance with these laws so that corrective action can take place,” the report said.
Ting said California laws are not being followed, partly due to the state’s non-judicial foreclosure process. In other states, he said, judges routinely review foreclosures.
“California has borne the brunt of this foreclosure crisis,” Ting said. “And what we are seeing is that this whole process of the way we are foreclosing property, taking property, from the county land records, from the mortgage industry, from the consumer side, is absolutely 100 percent broken. And I don’t think it’s working for any of us, at this point.”
Ting recommended the passage of new legislation to improve transparency in document recording, foreclosure processes and so-called dual tracking, in which a bank simultaneously begins foreclosure while also discussing a loan modification with a borrower.
The report noted that the existing foreclosure process was created years before home-buyers worked with mortgage brokers and lenders began routinely reselling new loans to other banks to service.
In the wake of the recent major national settlement with the banking industry, Ting plans to forward the report to policymakers, state legislators, state and local prosecutors, and the mortgage industry.
“What the settlement didn’t do was actually look at, in the future, what should this foreclosure process look like in the state of California?” he said.