What Is a Robo-Signer?

A robo-signer refers to an employee of a mortgage servicing company that signs paperwork such as foreclosure documents robotically without reviewing them. Rather than actually reviewing the individual details of each case, robo-signers assume the paperwork to be correct and sign it automatically – like robots. In some cases, software is in fact used to robo-sign.

Key Takeaways

  • A robo-signer is somebody who blindly rubber stamps documents or applications without reviewing them properly.
  • Because documents are not inspected, applicants that deserve approval are denied or those that should be denied are approved. This leads to unfair and unethical practices.
  • Robo-signing has been identified as an important factor that exacerbated the mortgage and foreclosure crisis during the Great Recession.

Understanding Robo-Signers

Robo-signers rubber stamp documents without any serious inspection of the materials or documents being approved or denied, and so may approve or deny applications that do or do not have merit. As a result, it can lead to unfair, unethical, or even illegal practices. Robo-signing has been revealed over the past few years by journalists and financial regulators.

In the third and fourth quarters of 2010, a robo-signing scandal emerged in the United States involving GMAC Mortgage and a number of major U.S banks. Banks had to halt thousands of foreclosures in numerous states when it became known that the paperwork was illegitimate because the signers had not actually reviewed it. While some robo-signers were middle managers, others were temporary workers with virtually no understanding of the work they were doing.

How Robo-Signers Affected the Legal Standing of Foreclosures

The repeated issue with robo-signers was their tendency to simply advance documents for foreclosure with little time spent processing and reviewing their contents. This stemmed from such problematic circumstances as high workloads and high expectations for turnout. In some instances, such signers admitted in court that they put their signatures on as many as 10,000 foreclosure documents in one month. While such signings are supposed to include a careful examination of the documentation, those procedures were not always followed. Instead, the signer might simply look for basic information such as an amount owed on a mortgage and the name of the borrower. The rest was assumed to be accurate and the documents were signed off.

While there maybe have been some minimal training offered, robo-signers frequently admitted to not having a complete understanding of the elements of the documents they were signing. This included not being aware of how such documents might be used in court proceedings. Furthermore, the signers were often short-staffed in relation to the overall workload they were assigned to process at times with little or no instructions on how to handle the documents. In addition to signing foreclosure documents with little review time, some robo-signers also introduced new errors, such as miscalculating the value of homes or not reporting the effects an appraisal had on that value.

The questionable clerical practices of these workers led attorneys of homeowners who faced foreclosure to move to have the cases thrown out, claiming that the documents had no legal merit.

After the existence of robo-signers was made publicly known, forcing foreclosure documents to be reexamined, the workers who engaged in this practice may have faced disciplinary action and termination from the institutions who employed them to perform this task. The lenders, despite not seeing issues with their work prior to the widespread exposure, might fire a robo-signer for not following company policies.