Katherine Porter to Senate: No Non-Judicial Sales While System Is In Doubt

10.27.2010 KATHERINE PORTER SENATE testimony-102710-porter

see also 10.27.10 OHIO AG ROBO AMICUS BRIEF ParmaForeclosureBrief

Katherine Porter is a visiting law professor at Harvard. Her 2007 study was the seminal work on mortgage and foreclosure irregularities. She found that 40% of the notes had been “lost” or destroyed. The following is an excerpt from her testimony today before a Senate Committee. The entire transcript is in the link above.

Due process does not disappear merely upon the assertion by one party that the other is clearly liable. The allegations of problems in mortgage servicing should, if anything, only heighten the due process requirements on consumers. For example, in light of the lack of verification procedures for affidavits to support requests for judgments in judicial foreclosures, it may be reasonable to be concerned that there is absolutely no verification of the facts in the non-judicial foreclosure context.

Thus, we might argue that states or the federal government ought to increase the legal requirements for foreclosures across the board, at least for loans initiated in the last five to ten years when widespread allegations of paperwork and procedural problems have existed. The banks’ arguments that we can ignore possible systemic wrongdoing by the banks because as a systemic matter, homeowners are in default on their loans, is unpersuasive. Indeed, it seems to reflect a fundamental misunderstanding of the obligations of any party wishing to invoke the aid of the law in enforcing its rights.

The most pressing issue is to assess the extent of the wrongful or problematic foreclosures. This assessment needs to have two fundamental parts. First, how many loans or foreclosures have any defect? Second, what kinds of defects do the troubled loans or foreclosures have? Without an answer to these questions, it is nearly impossible for anyone to do more than speculate about the key questions before this panel about the impact of these troubled loans or foreclosures on the government’s foreclosure mitigation efforts and the well-being of financial institutions.

The immediate need is to know the extent to which the problems in mortgage servicing occur sporadically or are endemic. As a preliminary matter, I note that it is simply not credible to believe that the lenders have made no errors in their foreclosure procedure. Because they are being allowed to control the definition of error and are being allowed to audit themselves, we cannot have confidence in such reports. The question is then is whether the rate of troubled loans is nearly 100% as some have alleged, or rather is a smaller fraction of loans, such as 5%.

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