Leverage: State Enforcement Actions in the Wake of the Robo-Sign Scandal

In the fall of 2010, the revelations that tens of thousands of foreclosure filings across the nation were likely fraudulent—if not outright criminal—sparked a nation-wide investigation by all fifty state attorneys general to assess the extent of the scandal and its potential impacts, but also to consider likely legal and policy responses to such behavior. One of the tools at the state attorneys general’s disposal that might rein in this behavior includes each state’s Unfair and Deceptive Acts and Practices (UDAP) laws. Such laws typically prohibit “unfair” and “deceptive” practices, which are described loosely in these laws, and often give consumers, as well as state attorneys general, the ability to bring affirmative litigation to rein in practices that violate their provisions. They are often drafted with less specificity than other laws, and give litigants and the courts a certain degree of leeway in mapping out their contours in response to evolving market practices. In this way, UDAP laws serve a critical consumer protection function by filling in gaps in the law where other, more targeted laws might not cover practices that have a harmful impact on consumers. Since their inception, UDAP laws have been used to rein in abusive practices in various areas and this article explores the availability of UDAP laws and the remedies they provide to rein in the range of practices revealed in the so-called “Robo-Sign Scandal.” It concludes that such practices—the false affidavits, reckless claims, and improper notarizations—all violate the essence of most state UDAP laws; accordingly, the remedies available under such laws may be wielded by state attorneys general to halt abusive foreclosure practices throughout the nation. What is more, UDAP actions in light of robo-sign abuses could help chart a path towards a more robust mortgage modification regime, one that would result in principal reductions. In the end, such strategies offer the clearest path out of the current foreclosure crisis