John and Mary Jacob (names changed) have gone all the way to the top courts in their state to try and stop their own foreclosure. Ultimately due to an error on the part of their lender during the closing process, they believe the foreclosure should be stopped immediately. Mr. and Mrs. Jacob have repeatedly cited that their situation is illegal and unfair and occurring all over the country.

Attorney Generals in 23 states are compiling lists of similar errors and demand that national banks halt these foreclosures as well as every single foreclosure in the America to check for the same error. The arguments have reached the White House and the President is so concerned that he has requested his personal attorneys to go back and check the mortgage documents he has on file for his family home in Chicago.

What is quickly becoming the number one lender error in foreclosures?

Dale Robyn Siegel

The Jacobs original mortgage was signed in black ink rather than blue ink! It is fact and procedure that legal documents which are recorded in county clerks offices require blue ink for signatures. The blue ink allows the clerk and others to distinguish the signature as original. Often a photocopy of a document was illegally recorded because the clerk thought it was black ink, creating phantom mortgages on properties, illegally transferred ownership and even fraudulently signed divorce agreements. To stop this type of fraud, the industry made it common practice many decades ago to sign all recorded documents in blue ink.

Their attorney argues that the mortgage, which the Jacobs have had for the last five years, and stopped paying twelve months ago after John got laid off, was a sham from day one. He is requesting that the court throw the mortgage out as illegal and is trying to make a deal with the lender to stop to absolve his clients of any mortgage liability at all. He is considering going after the bank, the attorneys and even the county for punitive damages. Could this become a class action suit against the top five lenders in the United States?

Who is at fault here?

We cannot blame the borrower for signing documents in anything other than blue ink, Jacobs’ attorney states. They certainly would not be aware of this unless they were told. It happens at the closing table and the professionals involved should know better. The lender’s attorney, the title company, the buyer and seller representatives are all at this table. Each and every one of these professionals is present and aware that blue ink must be used to sign the mortgage!

It is now coming done to finger pointing and blame. The bank attorney or escrow agent, depending on which state you are in, is in charge of the closing, so should they be responsible? The buyer’s attorney is supposed to walk the person through the signing of the documents and should make sure that they are signing in blue ink. Should they be brought up on charges of malpractice? The title company representative is the person that takes this mortgage and makes sure it is recorded in the county clerk’s office. Should they be fined for violating this blue ink code?

Or is it a conspiracy theory in many of these cases, where each of these people were aware that blue ink was not being used and did not correct the matter at the time. Were they all aware that later on it could be a defense in a foreclosure action against the borrower? Apparently lenders are looking into the conspiracy theory now and heads are going to roll all over closing rooms this week!

What is the ultimate test?

The issue here is to make sure the signatures is original whether it was in blue ink or black or even green for that matter. Now that color copies are easily accessible, the Attorney General from Kansas brought up, how do we know that even the color signatures are real? There is only way to know if the signature is original.

The ink must be wet to see if it smudges. Ink will smudge where photocopies won’t. This is also known as the “lick test”. In order to clear the air on this issue, each and every one of these recorded documents must be retrieved from storage, which could take weeks. The file must be opened and the signature page (last page of the mortgage document) must be located-sometimes there is a rider on the mortgage which requires another signatures. After this, it must be licked by someone. If it smudges, it is original; if it doesn’t then it is a fake!

Who should be in charge of the testing?

The White House is meeting with a bi-partisan committee Tuesday morning (they are not working on Columbus Day) at a special breakfast to discuss this fact and procedure. What is the fastest way to locate the mortgage documents in question, who will lick it, should there be a double lick, should there be someone else in charge of the licker? What kind of man power is required for this and how involved should the government get?

The Administration knows that this could easily become a hanging chad situation and with the Supreme Court first reconvening this month, there might be a backlog in the calendar.

How long with the foreclosure halt be and what will the affect on the market?

The Blue Ink Problem, as it is known, can spiral into a much larger issue, creating months of delays in the lick testing. This would halt foreclosures from moving forward and ultimately take thousands of homes for sale out of inventory. This can delay the rebound of the real estate market even further. We can only hope that this will not flow into the typically busy spring market.

The Supreme Court might very well need to get involved. We will watch carefully as this unfolds into another national dilemma.