Can We Trust Trustees? Proposals for Reducing Wrongful Foreclosures
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John E. Campbell
University of Denver Sturm College of Law
October 19, 2012 Last revised: June 11, 2013
Catholic University Law Review, Vol. 63, 2014
U Denver Legal Studies Research Paper No. 13-22
Abstract:
Over 10 million foreclosures have been initiated in the United States since 2008. In almost half of these, there is no court review. Instead, the only safeguard to ensure that foreclosure is merited is a “trustee.” As such, the trustee is a central figure in foreclosure and has the potential to serve as a true failsafe against reckless or overtly fraudulent foreclosures. There is one problem; the trustee is not neutral. Instead, the modern trustee is unregulated and almost always financially and legally tied to the banks that initiate foreclosure. These banks are known bad actors that created the worldwide economic collapse through non-existent underwriting, rampant and reckless securitization, forged documents, and sloppy payment collection leading to over $33 billion dollars in settlements to date.
With these facts in mind, how is it that the law allows a bank to hand-pick a neutral? Who are these “neutrals” that are being picked? And what is the result of trusting the bank’s right-hand man to look out for homeowners? This article answers these questions by detailing the current role of trustees, telling the stories of real homeowners who are losing their homes despite being current on their payments, and analyzing the current system’s flaws. It then proposes a detailed set of reforms that will transform the trustee from a potential shill for banks into a meaningful gatekeeper who guards against wrongful foreclosure.
