Obama Should Veto Bill That Makes It Harder For Foreclosure Victims To Challenge Banks (UPDATED)

Yesterday, the Justice Department announced that it will investigate the foreclosure practices of several financial firms, after widespread reports of foreclosures being approved by bank “robo-signers” (employees who weren’t verifying the necessary documentation to legally okay a foreclosure). One Bank of America official admitted that he approved 7,000 to 8,000 foreclosure filings a month without reading them, while a Wells Fargo executive said that he would only check the date on up to 150 foreclosures he approved daily.

One of the problems with the foreclosure documents has to do with notarizations. Notaries are supposed to be impartial third-parties that verify documents and legal proceedings, but the banks have been using dubious notatizations to justify foreclosures. For instance, “in some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.”

And right before it recessed last week, the Senate passed a bill — the Interstate Recognition of Notarizations Act of 2010 — that could make this problem worse:

The bill, passed without public debate in a way that even surprised its main sponsor, Republican Representative Robert Aderholt, requires courts to accept as valid document notarizations made out of state, making it harder to challenge the authenticity of foreclosure and other legal documents.

Forcing any state to immediately accept notarized documents from out of state not only makes it harder for homeowners to challenge the banks, but could also lead to a race to the bottom, as banks will originate all their documents in states that have the most lax standards. It would only take one state significantly lowering its standards (in the face of bank lobbying or the promise of banks moving jobs into the state) and suddenly homeowners would have to accept bank documents with no idea whether the information on them was verified properly by an impartial observer.

Ohio Secretary of State Jennifer Brunner said that the law “would weaken protection of homeowners by requiring many states to accept lower standards for notarizations,” adding that it was “‘suspicious’ that the law unexpectedly passed just as the mortgage industry is facing possible big costs from having filed false or improperly notarized documents.” “It is troubling to me and curious that it passed so quietly,” added Thomas Cox, a Maine lawyer representing homeowners contesting foreclosures.

The bill, passed by unanimous consent, was shepherded through the Senate at the last minute at the behest of Sens. Patrick Leahy (D-VT) and Jeff Sessions (R-AL). Leahy’s staffers cited unnamed “constituents” who had pushed for passage, but wouldn’t say “who these constituents were or if anyone representing the mortgage industry or other interests had pressed for the bill to go through.”

The House has already passed a companion bill to the Senate’s legislation, so it is currently sitting on President Obama’s desk. Obama should veto this legislation, and not make it easier for banks to fraudulently throw homeowners out of their homes.


A White House official tells the Huffington Post’s Arthur Delaney, “we are reviewing the legislation, but do have concerns.”

Share Update


,Obama announced today that he will not sign the legislation:

Today, the White House announced that President Obama will not sign H.R. 3808, the Interstate Recognition of Notarizations Act of 2010, and will return the bill to the House of Representatives. The Interstate Recognition of Notarizations Act of 2010 was designed to remove impediments to interstate commerce. While we share this goal, we believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized.

Notarizations are important for a large range of documents, including financial documents. As the President has made clear, consumer financial protections are incredibly important, and he has made this one of his top priorities, including signing into law the strongest consumer protections in history in the Wall Street Reform and Consumer Protection Act. That is why we need to think through the intended and unintended consequences of this bill on consumer protections, especially in light of the recent developments with mortgage processors.

Share Update