If you were watching "Squawk Box" this morning, you probably heard Rick Santelli ask Mohamed El-Erianabout a mysterious interstate notary bill that might bail out banks such as GMAC,JP Morgan Chaseand Bank of Americafrom their foreclosure gate troubles.
At stake was the ability of homeowners to challenge foreclosure attempts by banks. Recently, several large banks have had to halt foreclosure proceedings in many states when it emerged that their loan officers had taken short-cuts to speed foreclosures.
Ordinarily, banks are able to get a quickie foreclosure through the courts by having officers swear out statements claiming they have personal knowledge of the details of the loans and the delinquencies of borrowers. But it has now emerged that loan officers at some banks were just signing the statements kicked out by a computer without having reviewed the loan materials.
Basically, the banks gave liar loans and now they are trying to push through liar foreclosures.
El-Erian had never heard of the bill, which is formally called " The Interstate Notarization Act of 2010." Almost no one has, despite the fact that it has been proposed at least twice in Congress. It passed without any public debate on the final day the Senate was in session before recess.
The White House announced Thursday afternoon that the president won't sign the Interstate Notarization Act after the media stirred up a frenzy over the bill.
Dan Pfeiffer, the White House communications director, stated the following in a blog post on the White House Web site .
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.
The authors of this bill no doubt had the best intentions in mind when trying to remove impediments to interstate commerce. We will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward.
For anyone who has waded through the thousands of pages of the Dodd-Frank financial reform bill, the Interstate Notarization Act is surprisingly brief. It mandates that federal and state courts across the country recognize the notarization of a notary public licensed or commissioned under the laws of any state. You can read the full text here .
The fear was that the bill would allow banks to "forum shop," pushing through notarized foreclosure statements from states with lose standards or courts unfriendly to challenges to notarized foreclosure statements. Proponents of the bill most likely argued that it would help avert a nation-wide slowdown to the foreclosure process that could serve simply to delay a housing recovery by leaving more houses in mortgage limbo.
Here's the report from Reuters :
A bill that homeowners advocates warn will make it more difficult to challenge improper foreclosure attempts by big mortgage processors is awaiting President Barack Obama's signature after it quietly zoomed through the Senate last week.
The bill, passed without public debate in a way that even surprised its main sponsor, Republican Rep. 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.
The timing raised eyebrows, coming during a rising furor over improper affidavits and other filings in foreclosure actions by large mortgage processors such as GMAC, JPMorganand Bank of America.
Questions about improper notarizations have figured prominently in challenges to the validity of these court documents, and led to widespread halts of foreclosure proceedings.
The legislation could protect bank and mortgage processors from liability for false or improperly prepared documents.
The White House said it is reviewing the legislation.
"It is troubling to me and curious that it passed so quietly," Thomas Cox, a Maine lawyer representing homeowners contesting foreclosures, told Reuters in an interview.
A deposition made public by Cox was what first called attention to improper affidavits by GMAC. Since then, GMAC, JPMorgan and others have halted foreclosure actions in many states after acknowledging that they had filed large numbers of affidavits in which their employees falsely attested that they had personally reviewed records cited to justify the foreclosures.
Cox said the new obligation for courts to recognize notarizations of documents filed by big, out-of-state companies, would make it more difficult and costly to challenge the validity of the documents.
The law, the "Interstate Recognition of Notarizations Act," requires all federal and state courts to recognize notarizations made in other states.
The law specifically includes "electronic" notarizations stamped en masse by computers. Currently, only about a dozen states allow electronic notarizations, according to the National Notary Association.
"Constituents" Pressed For Passage
After languishing for months in the Senate Judiciary Committee, the bill passed the Senate with lightning speed and with hardly any public awareness of the bill's existence on September 27, the day before the Senate recessed for midterm election campaign.
The bill's approval involved invocation of a special procedure. Democratic Senator Robert Casey, shepherding last-minute legislation on behalf of the Senate leadership, had the bill taken away from the Senate Judiciary committee, which hadn't acted on it.
The full Senate then immediately passed the bill without debate, by unanimous consent.
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