A Blast from the Past: Are the Robo-Signing Issues that Plagued the Mortgage Crisis Set to Engulf the Student Loan Industry?
28 Pages Posted: 25 Mar 2014
Date Written: March 24, 2014
Homeownership and a college education have long been considered part of the American Dream. In order to achieve homeownership, many Americans took out risky loans and sub-prime mortgages in the late 1990s and early 2000s. However, when housing prices plummeted, many homeowners were forced into foreclosure proceedings after they fell behind on their mortgage payments and could not resell their property to cover the full amount of their debt. In response to a record number of foreclosure proceedings and the overwhelming amount of paperwork associated with it, creditors began a predatory practice referred to as robo-signing, which is the process of certifying the accuracy of documents without any personal knowledge of the facts contained within the documents. The robo-signing practice deprived homeowners of their due process rights and, in some cases, cost people their homes. In response, the federal government imposed significant fines on robo-signers and state courts reacted by enacting new court rules to end the practice.
While the new court rules and federal fines have curbed robo-signing in the realm of foreclosure proceedings, the predatory practice could still threaten the American Dream. Over the last decade student loan debt has ballooned, as student loans have become an increasingly important financing source for secondary education. Exacerbating the problem, increased student debt has also been met with stagnant incomes for college graduates and increased unemployment rates. As such, many student loan debtors are beginning to default on their loans. The default rates on student loans are projected to be significantly higher than any default rates seen in the mortgage industry, raising concerns as to whether robo-signing practices might reemerge. If so, the predatory practice could substantially damage the student debt industry, and significantly burden student loan debtors. This topic is incredibly important to attorneys given the fact that the average law school graduate faces an average student loan deb of $98,500. Ultimately, courts are in a position to pre-empt this issue by instituting the same rules adopted to curb robo-signing practices in the mortgage industry, essentially ending the predatory practice before it has an opportunity to return.
Keywords: law, legal, home, mortgage, money, investment, robo, sign, documents, student, loans, education, funding, problem, debt
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