Congressman Barney Frank on Wednesday asked his colleagues to hold a hearing on alleged mortgage abuses at Ally Financial, a day after the attorney general from his home state of Massachusetts requested that lawmakers investigate.
“Given Ally’s significant role in the mortgage business and the federal government’s considerable financial investment,” Frank wrote to Spencer Bachus, the chairman of the House Financial Services Committee, “a prompt investigation of this matter by the Committee is warranted.”
The U.S. Treasury owns some 74 percent of Ally after a 2008 investment in the firm.
Last week Massachusetts sued Ally’s mortgage unit, GMAC Mortgage, and four other top banks for allegedly pursuing illegal foreclosures and deceiving homeowners whose loans they service.
THE COMMONWEALTH OF MASSACHUSETTS OFFICE OF THE ATTORNEY GENERAL ONE ASHBURTON PLACE BOSTON, MASSACHUSETTS 02108 MARTHA COAKLEY ATTORNEY GENERAL (617) 727-2200 www.mass.gov/ago
December 6, 2011 The Honorable Tim Johnson Chairman
U.S. Senate Committee on Banking, Housing, and Urban Affairs 534 Dirksen Senate Office Building Washington, D.C. 20510
The Honorable Spencer Bachus Chairman U.S. House Committee on Financial Services 2129 Rayburn House Office Building Washington, DC 20515
Re: Ally Financial; GMAC Foreclosure Behavior
I am writing regarding what we believe is serious misconduct committed by Ally Financial, through its subsidiary GMAC Mortgage, against homeowners in Massachusetts.
Last week, our office filed a lawsuit against Ally and four national banks for pursuing illegal foreclosures and deceptive loan servicing. Ally and other banks charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law, which has exacerbated the nation’s foreclosure crisis. In light of Ally’s alleged deceptive and illegal actions against homeowners in Massachusetts and across the country, I respectfully request that your committees investigate Ally’s serious misconduct and consider what actions the federal government can take to ensure that Ally adheres to the law.
Marie McDonnell, President of McDonnell Property Analytics, Inc., and a pioneer inexposing fraudulent and illegal practices in the mortgage industry through her forensic audits, todaycommends Attorney General Martha Coakley and her staff for filing a comprehensive lawsuit againstBank of America Corp., Wells Fargo & Co., J.P. Morgan Chase & Co., Citigroup, Ally Financial Inc., MERSand MERSCORP, Inc.
“Today, AG Coakley took strong and decisive action to enforce the rule of law and obtain meaningful relief for Massachusetts consumers. As someone who has worked extensively with homeowners who have faced the threat of foreclosure due to unforeseen circumstances such as illness and job loss, or because they were intentionally victimized by these banks for profit motives, I feel it is imperative that the banks be held responsible for the damage they have caused to people’s lives, their communities and the Commonwealth at large. I applaud AG Coakley for having the courage to stand up to these rogues and hold them accountable for what they have done, and I look forward to the relief and restitution that this will bring families moving forward.”
McDonnell was tapped by John O’Brien, Register of the Essex Southern District Registry of Deeds in Salem, to perform an in-depth forensic examination of assignments of mortgage recorded during 2010 to and from JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A., and Bank of America, N.A. to test the transparency and integrity of his registry. The audit gained national attention and uncovered massive fraud and defects in title, such as:
· Only 16% of all mortgage assignments examined are valid
· 75% of all assignments examined are invalid and 8.7% are questionable
· 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the
Massachusetts Mortgage Fraud Statute.
· 683 assignments are missing, translating to approximately $180,000 in lost recording fees per
1,000 mortgages whose current ownership can be traced.
The audit also revealed the pervasive role of MERS in the mortgage industry:
· 46% of mortgages are MERS registered
· 47% are owned by Government Sponsored Enterprises (Fannie Mae, Freddie Mac, Ginnie Mae)
· Typically ownership of these mortgages is obscure
One little-known fact revealed by McDonnell’s audit is that when JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A. and Bank of America, N.A. issue mortgage loans directly to consumers, they do not register them into the MERS System. McDonnell also found that these banks do not record interim assignments of mortgage and are in large part responsible for corrupting the chain of title in John O’Brien’s registry.
McDonnell’s audit supports Attorney General Coakley’s allegations that these banks committed unlawful foreclosures and engaged in deceptive practices.
McDonnell Property Analytics has and will continue to assist individual homeowners facing foreclosure and the attorneys who represent them.
Mass AG: “In this state, banks must follow laws. It appears GMAC acknowledges it has a problem following those laws & being held accountable.”
WSJ-
GMAC Mortgage, the mortgage lender of Ally Financial Inc., is exiting the vast majority of its lending in Massachusetts a day after the state sued it over its foreclosure practices.
The nation’s fifth-largest mortgage originator said it “has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable,” ratcheting up the high-stakes mortgage fight there.
Attorney General Martha Coakley sued the five biggest mortgage servicers Thursday, in the first government lawsuit targeting all five for alleged improper foreclosure practices including so-called robo-signing. The practice involves people who allegedly signed many foreclosure documents …
“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” said AG Coakley. “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”
The posse of Wall Street Sheriffs just got bigger: Massachusetts Attorney General Martha Coakley joined Nevada Attorney General Catherine Cortez Masto, New York Attorney General Eric Schneiderman and Delaware Attorney General Beau Biden. AG Coakley’s effort is the most comprehensive to date by far, in that she sues five major banks (Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally) and MERS for unlawful and deceptive conduct. (AG Masto still retains the title as the only AG bold enough to indict people.) Her suit does not include all the kinds of claims other AGs have alleged, however, and some of the claims are uniquely provable under Massachusetts law.
Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC All Named As Defendants; Mortgage Electronic Registration System (“MERS”) Also Sued
BOSTON – Five national banks have been sued in connection with their roles in allegedly pursuing illegal foreclosures on properties in Massachusetts as well as deceptive loan servicing, Attorney General Martha Coakley announced today. The lawsuit was filed today in Suffolk Superior Court against Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC. It also names Mortgage Electronic Registration System, Inc. (“MERS”) and its parent, MERSCORP Inc., as defendants.
“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” said AG Coakley. “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”
In the complaint , the Attorney General alleges these five entities engaged in unfair and deceptive trade practices in violation of Massachusetts’ law by:
Pervasive use of fraudulent documentation in the foreclosure process, including so-called “robo-signing”;
Foreclosing without holding the actual mortgage (“Ibanez” violations);
Corrupting Massachusetts’ land recording system through the use of MERS;
Failing to uphold loan modification promises to Massachusetts homeowners.
USE OF FALSE DOCUMENTS TO EXPEDITE FORECLOSURES “ROBO-SIGNING”:
According to the complaint, the banks used false documentation in the foreclosure process, including so-called “robo-signing”, whereby bank personnel signed affidavits that were untrue, or not based on the signor’s actual knowledge. An entity wishing to foreclose on a property must demonstrate it has filed an affidavit in compliance with Massachusetts law. By October 2010, the banks’ flagrant disregard of affidavit and notary process requirements became widely known. Filings with various Registers of Deeds provided to the Attorney General’s Office revealed the pervasive use of mortgage service employees to sign hundreds of affidavits and sworn statements without personal knowledge of the information contained in those affidavits. Evidence also suggests these practices were not confined to the foreclosure process, but also used in the assignment, transfer and modification of mortgages secured by property in Massachusetts.
FORECLOSING WITHOUT LEGAL AUTHORITY “IBANEZ VIOLATIONS”:
Second, these five entities participated in unlawful foreclosures when they commenced foreclosures on mortgages where they were not the holders of those mortgages. The Supreme Judicial Court (SJC), in Commonwealth v Ibanez, recently upheld Massachusetts law and stated that “only the present holder of a mortgage is authorized to foreclose on the mortgaged property.” The complaint alleges that these entities ignored this fundamental legal mandate and proceeded to foreclosure even though they did not hold the mortgage, and thus had no legal authority to conduct the foreclosure. The banks’ failure to obtain a valid assignment of the mortgage prior to foreclosure has adversely impacted titles to hundreds, if not thousands, of properties in the Commonwealth. The complaint alleges that the banks falsely claimed to be the holder of a mortgage in several foreclosure documents even though they failed to obtain a valid assignment of the mortgage.
UNDERMINING PUBLIC RECORDS “MERS”:
Third, the complaint alleges that these banks have undermined our public land record system through the use of MERS, a private electronic registry system. According to the complaint, the creation and use of MERS was adopted by these defendants primarily to avoid land registration and recording requirements, including payment of recording and registration fees, and to facilitate sales of mortgage loans. The use of MERS has resulted in a lack of transparency as to the entities that have the legal authority to enforce mortgages, and unfairly conceals from borrowers the true identity of the holder of the debt. Since 1997, more than 63 million home loans have been registered on the MERS System, accounting for more than 60 percent of all newly-originated mortgage loans. The complaint also alleges that through the use of the MERS system, the banks unlawfully failed to register assignments of mortgages and transfers of the beneficial interests in mortgages.
MISREPRESENTING LOAN MODIFICATION PROGRAMS:
Finally, the complaint alleges the banks deceived and misrepresented to borrowers the process, requirements, and availability of loan modifications. The banks publically claimed to be engaged in widespread loan modifications aimed at preserving home ownership and avoiding unnecessary foreclosures. Through the National Homeownership Retention Program, which commenced on November 6, 2008, these banks represented that they would work with borrowers to help them avoid unnecessary foreclosures by reducing monthly mortgage payments to affordable and sustainable levels. The complaint alleges these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected.
The AG’s lawsuit seeks civil penalties, restitution for harm to borrowers and compensation for registration fees that were avoided. The lawsuit also seeks to hold the banks accountable through permanent injunctive relief to provide a solution for prior unlawful foreclosures and to require that the banks, going forward, register assignments and other documents in accordance with Massachusetts law.
The lawsuit follows more than a year of negotiations with the banks over a 50-state settlement focused around the issues of fraudulent documents, including “robo-signing.” AG Coakley had made clear that she would not sign on to an agreement with the banks if it included broad liability release regarding MERS and other issues or if she did not believe the banks had come to the table with an offer in the best interest of Massachusetts.
AG Coakley’s office has been a national leader in holding banks and investment giants accountable for their roles in the economic crisis. AG Coakley has obtained recoveries from Morgan Stanley, Goldman Sachs, Royal Bank of Scotland, Countrywide, Fremont Investment & Loan, Option One, and others on behalf of Massachusetts homeowners. As a result of these actions, her office has recovered more than $600 million in relief for investors and borrowers, helped keep more than 25,400 people in their homes, and returned nearly $60 million in taxpayer funds back to the Commonwealth.
More information about AG Coakley’s work during the lending crisis can be found here .
The lawsuit is being handled by Attorney General Martha Coakley’s Consumer Protection Division, including Assistant Attorneys General Amber Villa, John Stephan, Sara Cable, and Justin Lowe; Acting Division Chief David Monahan; Chris Barry-Smith, Chief of the Public Protection & Advocacy Bureau and Stephanie Kahn, Deputy Chief of the Public Protection & Advocacy Bureau.
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