SAN FRANCISCO (Reuters) – An outcry over questionable foreclosures by GMAC Mortgage and other lenders is likely to hit some states more than others because of major differences in real estate law across the nation.
But ramifications for federal taxpayers and investors will depend on the costs of clearing up the problem, the latest fallout from the bursting of the U.S. real estate bubble.
GMAC Mortgage announced last week that it had suspended evictions and post-foreclosure closings in 23 states due to concerns over paperwork. In order for a lender to foreclose on a property, it must prove that it actually checked the borrower’s loan agreements, and that the homeowner defaulted.
But the unit of Ally Financial, which is 56.3 percent owned by the U.S. government after a $17 billion bailout, said employees preparing foreclosures had submitted affidavits to judges containing information they did not personally verify.
“It’s a real mess,” said Justice Arthur Schack, a jurist on foreclosure issues who sits on the New York State Supreme Court in Brooklyn.
GMAC’s announcement has raised doubts about whether some people lost their homes without good reason. Attorneys general in several states, including California, Colorado, Illinois and Ohio, are investigating.
“The law demands that lenders prove their case in foreclosure actions,” Illinois Attorney General Lisa Madigan said last week.
But Ally characterizes the problem as merely technical, arguing that the underlying facts in each foreclosure are accurate.
“We are confident that the processing errors did not result in any inappropriate foreclosures,” it said in a statement last week.
GMAC landed in its predicament after one of its employees testified in a December 2009 deposition that he signed off on tens of thousands of affidavits containing information he did not verify.
The company said it has “substantially increased” the number of employees to verify documents, provided additional training, and suspended evictions out of an “abundance of caution.”
Ally isn’t the only firm under the microscope.
JPMorgan Chase & Co is delaying its current foreclosure proceedings and has begun to systematically re-examine related documents after discovering that some employees may have signed affidavits in some cases without personally reviewing the files.
Lawyers in Florida are questioning JPMorgan’s practices after discovering one of its executives did not check the details of its claims against a homeowner.
The executive said she had been part of an eight-person team that signs 18,000 documents a
Chase Home Finance, LLC
Lender Processing Services
Long Beach Mortgage
Washington Mutual Bank
Action Date: September 30, 2010
Location: New York, NY
On September 29, 2010, financial giant JP Morgan Chase announced it was suspending 56,000 foreclosures because its documents may have been “submitted without proper review.” To assist JPMorgan Chase, Fraud Digest suggests that it dismiss those actions where the Affidavits or Mortgage Assignments were signed by the following robo-signers: Beth Cottrell, Whitney Cook, Christina Trowbridge and Stacy Spohn from the Chase Home Finance office in Franklin County, OH; Margaret Dalton and Barbara Hindman from the Jacksonville, FL office of JPMorgan Chase; and any of the Lender Processing Services robo-signers from the Dakota County, MN office including Christina Allen, Liquenda Allotey, Christine Anderson, Alfonzo Greene, Laura Hescott, Bethany Hood, Cecelia Knox, Topako Love, Jodi Sobotta, Eric Tate, Amy Weis and Rick Wilken. In particular, JP Morgan Chase should look at those cases where the bank has supposedly assigned mortgages to WaMu, WMALT, Long Beach Mortgage Company and NovaStar trusts years after the closing dates of these trusts. The number of questionable or fraudulent documents is likely to be much closer to 560,000 than to 56,000, and that will only be a good beginning.
Ally’s GMAC unit withdraws foreclosure affidavits signed by second employee
By Ariana Eunjung Cha | September 25, 2010; 11:34 AM ET
Was Kristine Wilson another “robo-signer”?
Attorneys for homeowners in Florida say Ally Financial’s GMAC mortgage unit has begun to withdraw affidavits submitted in support of foreclosures that were signed by a second employee. Like Jeffrey Stephan–the document processor who admitted in sworn testimony that he signed 10,000 documents a month without reviewing them–Kristine Wilson signed as a “limited signing officer” for GMAC.
In a request to withdraw an affidavit listing debts owed by a homeowner that was signed by Wilson in a Palm Beach County Circuit Court case, lawyers for GMAC say that “information in the affidavit may not have been properly verified.”