Categorized | Commercial

Robo-signing Problem Hits Commercial Mortgages

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Just weeks after settling a lawsuit related to a robo-signing problem with residential real estate mortgages, reports are now surfacing that the banks may have a far bigger issue related to robo-signing commercial real estate mortgages.


With 2012 expected to be a very difficult year with the anticipation of numerous commercial real estate defaults, various research groups are looking closely at documents used for the underwriting of financing for commercial real estate properties. Thus far, these groups have found a large number of inaccuracies and incomplete filings in the records on file throughout much of the United States.


This new robo-signing problem could present a new crisis for banks that dwarfs the recently settled residential real estate issue. Just last week banks reported that office and retail loan delinquencies hit record high levels. Typically such a situation would enable banks to foreclose on the commercial property and take ownership of it.


However, the robo-signing problem may make that process incredibly difficult. Because there may be issues of fraud, it could prove very difficult for banks to claim ownership of the properties. As such, it would be very difficult to foreclose on properties that are delinquent, or have stopped paying their mortgage loan all together.


Because these reports are just now surfacing, it is not clear as to how banks will handle the situation, or what its impact will be. What is certain, however, is that the banks are likely scrambling to determine the exact extent of the fraud related to the loan documents to figure out just how they will address it.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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