Yesterday, over 40 states entered into a settlement with the five major U.S. banks over fraudulent foreclosures based on robo-signing.  The banks involved were Wells Fargo, Bank of America, JP Morgan Chase, Citigroup, and Ally Financial (formerly GMAC). 

Importantly, as confirmed by Michigan’s Attorney General, Bill Schuette, in his statement yesterday, the settlement “does not preclude … individual homeowners from pursuing their own claims.”  This is fortunate.  As part of the settlement, the consumers who had their homes fraudulently taken away will only receive “payouts of about $2,000 each”, as reported by The Washington Post.

Some might argue that a $2,000 payment is a nice bonus for those who lost their homes.  However, the homes were taken away due to illegal court filings and faulty affidavits.  When one considers the values of the homes, and the stress and frustration the homeowners went through when they were unjustly kicked out of their homes, it is clear that the $2,000 per homeowner is nothing more than a slap on the wrist to the banks.

According to the Maryland judiciary’s Standing Committee on Rules of Practice and Procedure, “robo-signing” occurs in a foreclosure when the bank or its lawyer files an “affidavit as to which the affiant either did not have sufficient knowledge of the facts stated in the affidavit to validly attest to their accuracy or did not actually read or personally sign the affidavit.”  In other words, robo-signing is where a bank or its lawyer uses a sham affidavit to take away a person’s home.

Robo-signing is a problem because the American justice system should not be a shell game where the ends justify the means.  This is especially so when a person’s home is involved.  Instead, in a democracy based on respect for individual freedom and liberty, every phase of a lawsuit should be based on integrity.