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U.S. Trustees Increase Scrutiny of Foreclosure Cases - Part Two

In our last blog post, we discussed the United States Trustee Program's (USTP) increased scrutiny of foreclosure matters. We looked at two cases in which a trustee challenged banks' requests to have automatic foreclosure stays lifted despite the fact that they provided no evidence they were entitled to take such action. Today, we will continue to look at the controversial issue.

Although the judges in both cases we discussed last time have yet to rule on the banks' requests, the trustee' s intervention in these matters is significant. These occurrences may become increasingly frequent, as a spokeswoman for the USTP confirmed that the program would be focusing on ensuring the accuracy of banks' foreclosure practices.

Foreclosure defense attorneys welcome this new focus. Traditionally, trustees tend to side with creditors. Borrowers' attorneys often feel that trustees see their purpose as preventing borrowers from deceiving banks. Now, however, the attitude appears to be shifting, as trustees have become concerned about banks cheating borrowers as well.

These recent cases and declarations from the USTP send a clear message to banks: you cannot just say you have the right to foreclose. Rather, you must prove you have the right. The standard that may have applied at one time is being challenged, and banks must be prepared to meet the new standard.

While the heightened scrutiny in individual foreclosure proceedings is encouraging, many foreclosure defense attorneys are hoping for a comprehensive overhaul in banks' foreclosure practices. If more courts refuse to accept banks' claims at face value, the foreclosure system could become fair for borrowers and banks alike.

Source: The New York Times "Don't Just Tell Us. Show Us That You Can Foreclose," Gretchen Morgenson, 27 November 2010

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