Ally, formally GMAC, suspends evictions in 23 states admitting to "technical" deficiencies. by Gene DeNardo
(libertarian)
Saturday, September 25, 2010
Twenty three states require mortgage holders to obtain a court order before foreclosure proceedings on defaulted housing loans can begin. These states require a signed and notarized affidavit by an officer of the mortgage company {or holder} in effect swearing that they have witnessed and examined loan documents that prove ownership of the mortgage note and default of payments.
GMAC, the fourth largest mortgage lender in the country, has admitted that they have inadequately filed affidavits in according to a two page memo dated September 17 and obtained by Bloomberg News. The actual wording was, "need to take corrective action in connection with some foreclosures." They have suspended evictions in 23 states. The company may also have suspended sales of foreclosed homes in these states, but this point is not clear.
GMAC was the housing arm of General Motors. Instead of concentrating on improving the quality of their auto division and avoiding intervention by the federal government to save one of the big three from liquidation, they thought it might be a good idea to jump into the sub prime housing loan market. It wasn't. Last year GMAC received 17 billion in funds from the Feds and re branded themselves as Ally Financial. The federal government is now the majority stockholder of Ally.
Jeffery Stephens is one of the document signers for GMAC in Pennsylvania. He admitted to signing up to 10,000 loan documents a month. Although the courts require the documents to be thoroughly studied and verified in the presence of a notary, he admitted to barely scanning the name of the foreclosed party and a few other minor details.
There are 160 hours in a four week workweek. That would give us 9600 minutes, over one signature a minute. He did have the assistance of a team, but still the guy was fast. There is some evidence these "robo signers" are prevalent in the industry. This may be only the tip of the iceberg.
As was mentioned in the previous article on MERS, [link edited for length] the title process of over sixty million mortgages has bypassed the traditional method via the local county courthouse and has instead been registered in the corporate data base know as MERS {mortgage electronic registry service}. GMAC is one of the shareholders of this firm, along with the other mortgage titans. Virtually all of these mortgages have been bundled into mortgage backed securities with hundreds or even thousands of other loans and resold. While every mortgage transaction is theoretically tracked by MERS, the resulting "electronic" trail can be muddled and incoherent, as is to be expected with the volume of both mortgages and turnover.
This system of "robo signing" might be the industry's answer to insufficient paperwork. And, evidently to this point it has been quite successful. To be frank, many judges, like the rest of the population, don't really understand the workings of the secondary mortgage market and take for granted that the paperwork is there and in proper order. Others, tend to favor lenders and view defaulted homeowners as derelict. Also of bearing is the fact that homebuyers behind on their payments certainly can't be expected to have money left over to pay expensive lawyers, so usually go underrepresented in the courtroom. There is often no lawyer present to question the validity of the paperwork.
Also of consequence, is the repurchases of bank owned foreclosure property. If it found that recent mortgage company paperwork has been fraudulent or even insufficient, then the ownership of these recently sold homes will be in question. To say that the can of worms has been opened is a gross understatement. The opportunity for thousands of lawsuits and the resulting legal turbulence depends on the outcome of the present court cases.
These cases will be decided on a state by state basis and each state has different laws and regulations governing the process. But one constant does run through the system and that is the burden on the plaintiff to show proof of ownership of the mortgage note. How that must be shown may eventually be dropped in the lap of the Supreme Court. If the highest court is called upon, their solution will tell us much about the state of our justice system, whether or not the financial industry is above the "rule of law".
In question here is the system of privilege and advantage the mortgage industry has enjoyed. Filing and paying for standard mortgage paperwork is something any homebuyer has had to comply with and endure. This has not been the case with the secondary mortgage market. They, through their self instituted system of MERS, have been able to circumvent this time and money consuming process that insures that the rightful owner is documented.
A requirement by the courts for the industry to back peddle and provide all the necessary documentation that the rest of us would have to present in a court of law would be a profound and outstanding precedent. No longer would the cost and responsibility of ownership of mortgage notes be forgiven when those notes have been processed by a privileged corporate entity. They would be required to perform the same tasks that the law requires, adding cost and complications to the mortgage security business. Costs that should have been accounted for from the inception of the mortgage backed security.
Also on trial is our privileged system of ownership without liability and responsibility; the ability to extract paper profit without investing any work in the actual mechanics of ownership. The mortgage industry has been able to transfer this cost to the court system itself, relying on judges who have been all too willing to give the green light to foreclosures based on the "word" of the mortgage industry itself rather than what is required and as clear as day in the law itself. It is time for the courts to check their papers.
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