Monday, September 20,
2010
More on GMAC and Foreclosure Fraud Mess: “The Shit is
Hitting the Fan” (Updated)
Various updates on the possible drivers of the GMAC
announcement suspending its foreclosures in 23 states. Max Gardner, a North
Carolina bankruptcy attorney who is held in high esteem and is playing a
leading role in legal efforts against foreclosure fraud, provided this comment
on our earlier post on the GMAC bombshell:
I believe this action relates to thousands of false
affidavits filed by an officer of GMAC Residential Funding. It is also my
understanding that this particular officer may be facing a multitude of federal
and state criminal charges. As of this date, thousands of foreclosure
affidavits have been withdrawn in Florida and a number of notices of false
evidence have been filed by the mill law firms with the Florida trial and
appellate courts. This, in my view, is the tip of the iceberg!
More details from Jeffrey Stephens of the Florida Default
Law Group via e-mail:
On September 14, 2010, Florida Default Law Group filed
“Notices” in foreclosure actions that the firm was withdrawing Affidavits it
had previously filed. The Affidavits were signed by Jeffrey Stephan of GMAC
Mortgage/Homecomings Financial in Montgomery County, PA. Stephan had previously
admitted in depositions that he signed thousands of such affidavits each month
with no knowledge of the contents and in many cases without even bothering to
read the Affidavits. In the Notices, Florida Default claimed that “the
undersigned law firm was not aware” that the Stephans Affidavits were improper
and had a good faith belief in the Stephans Affidavits. Stephans signed so many
Affidavits, however, on behalf of so many different securitized trusts, that
his lack of actual knowledge should have been obvious. Many other mortgage
servicing companies and foreclosure firms have filed thousands of other
worthless, unfounded Affidavits. Perhaps the Law Offices of Marshall Watson
will notify courts that Lost Note Affidavits signed by Linda Green, Tywanna
Thomas and Korell Harp are also improper; perhaps The Law Offices of David
Stern will notify Courts that their own office manager, Cheryl Samons, had no
knowledge and did not even read the Affidavits she signed. The dark days of the
foreclosure “robo-signers” seem to finally be coming to an end in Florida. Will
the same judges who accepted thousands of these worthless Affidavits now
believe the allegations that the foreclosure law firms acted in good faith when
they presented these documents to Courts? An example of the Notice filed by
Florida Default is available in the “Pleadings” section of this site.
Highlights from the deposition of Jeffrey Stephan are available in the
“Articles” section. Scott Anderson, Bryan Bly, Margaret Dalton, Erica
Johnson-Seck, Crystal Moore and the other professional signers may finally be
held accountable for their sworn false statements.
I’m also told that an Mortgage Bankers Association
conference which is in progress, is “freaking out” over this. Um, how could
they not know this dead body was in the room?
This analysis from Jasraj Vaidya at Barclays via Brian C (no
online source). As this alludes, this has the potential to extend/derail
foreclosures and potentially increase loss severities. Moreover, the evidence
is mounting that documentation fraud has become widespread, if not pervasive,
because the securitization machinery effectively broke down on the back end
(the steps necessary to get the note, the borrower’s IOU, into the trust, were
not completed, and after the fact forgery is used to create a legally
acceptable paper trail).
It was reported on Bloomberg today that GMAC has sent a memo
to all brokers suspending all foreclosure activity against delinquent borrowers
in 23 states…
Most likely an issue with judicial states
Using publicly available data from HUD and RealtyTrac, we
have created a list of judicial foreclosure states. These are states where
judicial foreclosures are most common and in which the lender has to appear
before a judge and obtain a court order before initiating foreclosure
proceedings against the delinquent borrower. Such states tend to have much
longer foreclosure timelines than non-judicial states. What is striking about
the list of states in the GMAC announcement is that all but one (North
Carolina) are judicial states. Also, all judicial states in the country but one
(Delaware) are in the GMAC list. This would hint at some potential issues with
judicial states that is driving the GMAC directive.
A recent news report provided some hints at the type of
issues with judicial foreclosures that servicers may look to avoid before it
become a larger issue. The Florida Attorney General recently announced an
investigation of the three largest foreclosure law firms in the state. These
firms represent the lenders, and there have been question about claims of note
ownership put forth by these firms during foreclosure
proceedings. A clean record of note ownership is lost or
hazy in many cases, due to multiple transfers of the notes. The moratorium can
be an attempt on the part of RFC to ensure that the process does not have
significant flaws that can leave it open to legal action in the future.
At this stage, we are unable to ascertain what that exact
issue might be. What is certain is that foreclosure timelines in those states
for GMAC loans will be extend further, potentially adversely affecting their
eventual severity.
Can it also be a lawsuit in the making?
Given that the directive spans multiple states, and given
previous experience with Countrywide, there is always the possibility of some
multi-state settlement in the works for various disclosure issues with
lending practices. However, we found some major omissions
when we compared the list of states in the GMAC announcement with those
involved in the Countrywide announcement. California, Nevada and Michigan –
three states with significant mortgage volume, as well as distressed mortgages
– are missing from the announcement. This makes us a little skeptical whether
this is indeed a class action lawsuit in the making on the lines of the
Countrywide one. On the other hand, the Countrywide list ballooned from 11
states initially to 42 states and DC finally, so one cannot yet rule out
multi-state action. However, given greater evidence about judicial states, we
still believe that to be the primary driver of
this directive.
Update 5:00 PM: GMAC has issued a press release denying the
Bloomberg story, which is pretty curious, given that Bloomberg cited specific
language from a memo GMAC issued last Friday and got confirmation of the memo
from a named GMAC source. As we will show further down, Bloomberg has modified
its earlier report only slightly. While GMAC asserts it it in business as usual
mode, this is hardly the case; it has most assuredly suspended evictions in the
23 states in question.
Note that the press release indicates that the GMAC
investigation started more than three months ago. It further indicates (at the
top, where one might not notice the timing issue) that “new foreclosures” are
proceeding. That isn’t defined, since foreclosures consists of many legal
filings, but it gives the impression of meaning newly-initiated foreclosures.
Moreover, given the apparent change in procedures, it also raises the question
of whether this change will restrict the number of properties that can be
foreclosed upon. As we have indicated, the evidence is mounting that private label
securitizations in the post 2004 era suffered from widespread, if not endemic,
failure to convey the note (the borrower’s IOU) to the trust properly, which
means the trust cannot foreclose (ie, the trust lacks legal standing), and the
time has long passed for any easy remedies to be available.
Note even more curiously, this memo takes the line that the
problem was “procedural”. Hhm. So they found they had an internal officer
signing thousands of bogus affidavits? He presumably would not have gone this
route if there was not an impediment (presumably failure to convey the note
through the proper chain of endorsements, as required by the Pooling &
Servicing Agreement). And what workaround have they come up with, exactly?
From PR Newswire (hat tip reader mezcal). I’ve highlighted
the relevant sections
Recent reports have stated that GMAC Mortgage instituted a
moratorium on all residential foreclosures in 23 states. This is not true. In
fact, all new residential foreclosures are continuing in the ordinary course of
business with no interruption in our usual practice.
The speculation likely emanates from a direction previously
given by GMAC Mortgage to certain of its outsource vendors to allow time to
address a potential issue that was raised in a number of existing foreclosures
challenging the internal procedure we used for executing one or more judicially
required forms. This direction was to suspend evictions and REO closings where
the related foreclosure could have been impacted by the same internal procedure.
We are also reviewing certain previously completed foreclosures where the same
procedure may have been used.
We are unable to comment on the specific merits of the
challenge because some of them are in litigation. Nevertheless, a new process
has already been developed and implemented so that though some existing
foreclosures may experience delays while corrective action is taken, there will
be no interruption in new foreclosures. These delays are expected to be
resolved within the next few weeks and certainly before year end, without
serious consequence. GMAC Mortgage has been addressing the procedural challenge
for more than three months. In all other respects, the mortgage business is
operating as usual.
Now contrast this release, which in isolation reads like a
denial, with the updated Bloomberg story, which shows that you can drive a
truck through “In all other respects” qualification to the “business as usual”
claim:
Ally Financial Inc.’s GMAC Mortgage unit told brokers and
agents to halt evictions tied to foreclosures on homeowners in 23 states
including Florida, Connecticut and New York….
The company has been working on the issue for “more than
three months” and expects it to be resolved “within the next few weeks,” Proia
said. She declined to provide further details, saying some of the cases are in
litigation.
Suspensions will occur “where the related foreclosure could
have been impacted by the same internal procedure. We are also reviewing
certain previously completed foreclosures where the same procedure may have
been used,” Proia said.
The lender will suspend sales of bank-owned properties and
extend closings 30 days. Buyers will be able to cancel their agreement to
purchase and get their deposit back, according to the memo
.
Topics: Banking industry, Credit markets, Legal, moral
hazard, Real estate
Email This Post
Posted by Yves Smith at 3:52 pm
38 Comments » Links to this post
38 Comments:
• zephyrum says:
September 20, 2010 at 4:45 pm
Wow. Very interesting, Yves. Thank you.
(I can’t help reading the post title “More on GMAC…” as
“Moron GMAC…”)
• ScottP says:
September 20, 2010 at 4:45 pm
Thank you for sharing this. We need to know.
• steven teuber says:
September 20, 2010 at 4:57 pm
check it ou
• mezcal says:
September 20, 2010 at 4:58 pm
GMAC is now denying the entire thing.
MINNEAPOLIS, Sept. 20 /PRNewswire/ — Recent reports have
stated that GMAC Mortgage instituted a moratorium on all residential
foreclosures in 23 states. This is not true. In fact, all new residential
foreclosures are continuing in the ordinary course of business with no
interruption in our usual practice.
http://finance.yahoo.com/news/GMAC-Mortgage-Statement-on-prnews-2558172474.html?x=0&.v=1
• readerOfTeaLeaves says:
September 20, 2010 at 5:08 pm
So the mortgage bankers are ‘freaking out’?
This is news to them….?
How do they get their shoes tied in the morning?!
• John Stark says:
September 20, 2010 at 5:52 pm
Here’s a story about Bryan Bly, mentioned in the post above.
http://www.tampabay.com/news/business/realestate/when-bryan-j-bly-became-nb-did-he-know-what-he-was-signing/1103508
• John Stark says:
September 20, 2010 at 5:58 pm
There’s a Florida company called “Nationwide Title Clearing”
that handles lots of property reconveyance documents. Here in Bellingham,
Wash., at the opposite corner of the country, I’m finding many such documents
filed on properties here, signed by a small number of individuals identified as
“vice presidents” of various financial institutions. I’m trying to find out if
these documents, with little curlicue scribbles as signatures, are legally
valid. This is a non-judicial foreclosure state.
• Michael Redman says:
September 20, 2010 at 6:02 pm
Here is why they are freaking out. It is a huge issue and it
is all about to unravel…
http://4closurefraud.org/2010/09/14/what-what-re-jeffrey-stephan-of-gmac-florida-default-law-group-admits-to-violation-of-professional-conduct-code/
I just got off the phone with the Financial Times and GMAC
is saying it is just a technicality.
I have all the depos on the site above if interested.
GMAC is not the only one facing this issue…
• Z says:
September 20, 2010 at 6:13 pm
So what happens if these ownership documents are shown to
have been signed w/o no knowledge of the properties? It sounds like they can’t
foreclose then. Does the paperwork lead to another owner of the mortgages? Can
that owner of the mortgage foreclose? If not, can anyone foreclose on those
homes? If not, does that mean that these folks can stay in their houses w/o
making mortgage payments … essentially that they have free housing?
Z
• Z says:
September 20, 2010 at 6:22 pm
My first sentence should read as follows:
So what happens if these ownership documents are shown to
have been signed with no knowledge of the properties?
• Stupendous Man – Defender of Liberty – Foe of Tyranny
says:
September 20, 2010 at 6:28 pm
This is wonderful news. For the entire country.
I would love to start seeing charges brought, and
convictions obtained, for: forgery, uttering a forgery, possession of a forged
instrument, perjury, subbornation of perjury, bribing a witness, bribe
receiving by witness, tampering with public records, filing of sham pleadings,
fraud on the court, etc.
And attorneys must needs be prosecuted as well, both
criminally and with their BAR Associations. Can you say “dibarrment” boys and
girls?
May this not stop with GMAC as the practice is industry
wide.
• mezcal says:
September 20, 2010 at 7:13 pm
ZeroHedge now has the (purportedly) actual GMAC letter up.
http://www.zerohedge.com/article/gmacs-full-letter-agents-something-does-not-add
Kind of amusing watching all these fraudsters tripping over
each others spin.
• F. Beard says:
September 20, 2010 at 7:13 pm
It’s kind of fun watching an inherently dishonest system,
fractional reserve lending, implode.
What a twisted mess we make
when we dare to fractionate
• MinnItMan says:
September 20, 2010 at 8:15 pm
Reading between the lines here, I think this is probably
about “true and correct copies of originals” affidavits. The people signing
them don’t ever see first hand the originals they’re making their statements to
support. Very bad for them, and the cases depending on them.
This will affect everybody in a by-action state all most
lenders, since the T&CC affidavit is what gets foreclosure, what’s know as
a routine “document case” into court.
Note: I do not think this specifically relates to MERS
assignments or assignments at all. The T&CC affidavit is a court document,
not a real estate document.
Go short on the E&O insurers for the law firms and
foreclosure processing companies. Ulitmately, it is really “faster, better,
cheaper” that is going to be the culprit here. ) O for 3 ain’t bad.
• Stupendous Man – Defender of Liberty – Foe of Tyranny
says:
September 21, 2010 at 12:18 am
Not only do the rules require the affiant executing the
affidavit of merit to have personal knowledge it is also required that the
records referred to in the affidavit of merit actually be ATTACHED to the
affidavit. Further all of this needs to be attached to the motion for summary
judgment.
So many balls are being dropped by the courts, by
plaintiffs, and even by defense counsel.
◦ Stupendous Man – Defender of Liberty – Foe of Tyranny
says:
September 21, 2010 at 12:34 am
Replying to my own reply, LOL.
Federal Rule 56 has this to say:
(e) Affidavits; Further Testimony.
(1) In General.
A supporting or opposing affidavit must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that
the affiant is competent to testify on the matters stated. If a paper or part
of a paper is referred to in an affidavit, a sworn or certified copy must be
attached to or served with the affidavit. The court may permit an affidavit to
be supplemented or opposed by depositions, answers to interrogatories, or
additional affidavits.
■
Stupendous Man – Defender of Liberty – Foe of Tyranny says:
September 21, 2010 at 11:04 am
Now a Reply to a Reply to a Reply, LOL
Federal Rule 6(c)(2) has this to say about attaching
affidavits to a motion:
(2) Supporting Affidavit.
Any affidavit supporting a motion must be served with the
motion. Except as Rule 59(c) provides otherwise, any opposing affidavit must be
served at least 7 days before the hearing, unless the court permits service at
another time.
• PJ says:
September 20, 2010 at 8:29 pm
“So what happens if these ownership documents are shown to
have been signed w/o no knowledge of the properties? It sounds like they can’t
foreclose then. Does the paperwork lead to another owner of the mortgages? Can
that owner of the mortgage foreclose? If not, can anyone foreclose on those
homes? If not, does that mean that these folks can stay in their houses w/o
making mortgage payments … essentially that they have free housing?”
What happens? No one pays their mortgages and you kiss the
banking system and government good bye. I do not see it coming to pass. If so
hang on to your hats..
• Stupendous Man – Defender of Liberty – Foe of Tyranny
says:
September 21, 2010 at 12:47 am
The alternative of the foreclosure train continuing to gain
speed (which it is doing), having our middle class wiped out, and skyrocketing
rates of every bad societal malady overwhelming us, and that for the next
several decades, is even less acceptable to me.
It seems it is largely the “banks” that created this mess.
If there is any one/s, or any party/parties or entities that need to take the
fall I believe it to be them.
Besides, our current monetary system was a bad idea from
inception back in 1913. I see a reset button as a good thing. Kind of like
ripping off a bandaid.
• Lori Kelly says:
September 20, 2010 at 9:08 pm
Great stuff. Thanks for posting this. We have a group of
people at beingmiddleclass dot org sharing information, exchanging ideas and
will not allow the middle class to disappear.
I am hanging on to my hat. What a message we could send as a
group to stop paying our mortgages and let the banksters fail.
• MichaelC says:
September 20, 2010 at 9:11 pm
Yves
And so it begins. It’s worht pointing out Treas is the
majority shareholder here.
Can you expand on the
Can it also be a lawsuit in the making? paragraph?
Would the Countrywide settlement you’re referring to be a
sweep things under the carpet deal in the works, or is it a positive
development?
• skippy says:
September 20, 2010 at 9:35 pm
Yeah who owns…cough bailed GMAC, the government as the proxy
of US citizens…hahahahahaha…bailed out so they could finnish the screw job they
started ROFLMAO.
Go get them…Tea Party[!] BTW who will end up shooting them
selves in a wild orgy of gun fire…sigh….hint Wall st and its bond holders O.K.
• anon48 says:
September 20, 2010 at 10:00 pm
“…the securitization machinery effectively broke down on the
back end (the steps necessary to get the note, the borrower’s IOU, into the
trust …”
Do these circumstances now permanently void the borrower’s
note? Or does it just mean a tremendous amount of bookkeeping cleanup (e.g.
tracking down the former legal holders of the notes and properly executing the
transfer into the trust? Wow, either way, this is huge-and- a much more
upsetting scenario than what was being discussed a few days ago on NC.
Side note, if a large number of former liar loan recipients
hit the lottery because of this mess and somehow get their homes back or
continue to own them now debt free, just hope the lending institution that has
to write the debt off remembers to issue the 1099C’s( Cancellation of Debt
income). If the government (taxpayers) winds up having to pay for this mess it
should make sure to collect appropriate income taxes from the winners.
• Yves Smith says:
September 20, 2010 at 10:20 pm
Actually, I’ve been saying this for months, at least since
May. The failure to convey the note correctly has huge implications. The
problem is the lack of centralized reporting makes it hard to be definitive re
conclusions, but the evidence all points to a widespread violation of
established procedures, and it appears to have started roughly in 2004.
◦ Glen says:
September 21, 2010 at 1:44 am
So when these deals were set up the mortgage brokers put
unqualified people in houses they couldn’t afford, and packaged up the loans
for an investment firm to sell as a AAA CDOs to some pension fund. The brokers
and and bankers got big fat fees (fees based on loan size), and walked away
from the mess.
So now, are we shocked when a foreclosure mill fakes
thousands of documents probably for a FEE? Sounds sorta like the same cast of
characters that ran the first scam are back for a second cut at big fat fees
and walking away from the mess.
Heck, as a taxpayer, I might be one of the owners of GMAC.
What’s the transactional costs on a foreclosure and who gets the bill?
• Rick Halsen says:
September 20, 2010 at 11:03 pm
Well this certainly looks like an unprecedented clusterfuck
of epic and monumental proportions.
Move along. Nothing to see here.
• killben says:
September 21, 2010 at 12:23 am
Go for it .. all about-to-be-foreclosed home owners (who
have received notices)..
This presents a great opportunity for about-to-be-foreclosed
home owners to come together and get themselves a battery of lawyers, who might
be interested now because they can get free publicity, and go after these
fraudsters.
• Bill says:
September 21, 2010 at 5:10 am
Soon all the fraudsters will be “singing” on each other,
hoping the others go to “Sing Sing” and not themselves. And the owners of the
MBS that have no backing , well … if I WERE GMAC I’d be scared form my life.
Thieves are as thieves do. And our Gov’t crooks bailed out these crooks .
Crooks are as crooks do . Know them ALL by their fruits . PROSECUTE AND
IMPRISON !!!!!!!!!
• Richard says:
September 25, 2010 at 9:27 pm
That’s a good question – one your loan servicer probably
can’t answer. If the servicer or trustee can’t prove ownership of both the
mortgage and note, you could be off the hook entirely!
I am defending against a GMAC foreclosure. Check out my
attorney’s website:
http://foreclosuredefensenationwide.com/
• Chris Huntington says:
September 21, 2010 at 8:51 am
My mortgage was refinanced through GMAC back in 2003. So for
my own peace of mind, how do I go about determining who actually owns the note
on my house? If it’s not GMAC, should I be paying the other party directly?
Because when I finish paying off my loan, if GMAC does not hold the note, they
can’t convey the deed. Worse yet, how do I know that the money I did pay
actually went toward my mortgage?
• TaJ says:
September 21, 2010 at 4:23 pm
@Chris H – Check your local county clerk of courts website
first. If you’re lucky and live in one with electronic documents like mine
(they scan in all filed legal documents) then you may be able to search and
pull up the documentation trail. As long as it doesn’t pass through MERS at any
point you should be okay. If you’re truly concerned though I would hire a
lawyer and look into the mechanics of ‘Quiet Title’ lawsuits.
• Richard says:
September 25, 2010 at 9:29 pm
If the servicer or trustee can’t prove ownership of both the
mortgage and note, you could be off the hook entirely!
I am defending against a GMAC foreclosure. Check out my
attorney’s website:
http://foreclosuredefensenationwide.com/
• ThommyMiller says:
September 21, 2010 at 12:56 pm
Sounds like there are a lot of you who are connecting the
dots finally. The banksters (fraudsters) are in deep poop now; obfuscation as a
modus operendi is going to get rampant, as is seen with GMAC. BofA is next. I’d
like to hear more about the courts which have “connected the dots” with the
help of our attorneys and actually pinned the tail on the donkey, giving title
to the homeowner. It is becoming obvious that we can stay in our houses indefinitely
when we stop a MERS foreclosure, but what about getting the title?
• Harry Connor Jr says:
September 22, 2010 at 1:52 am
Lawyers are always making mistakes in the foreclosure mill
madness. Judges too are helping compound the mistakes by virtually standing on
the sidelines while they let the lawyers devour homeowners. Because of this
neighborhoods with high concentrations of foreclosures are being trashed and
this trend of the dismantling or the destruction of foreclosures by homeowners
is accelerating.
The banking institutions want it all. I am sure there are
people in high places that understand that the game is permanently fixed, and
becoming more so, yet do not do a thing about it.
This disaster is enabling the banks and other cashed up (Wall
Street) investors to pick the eyes out of the declining market which is fast
heading for rock bottom prices. Unless the banks flush the country with cheap
loans once again (don’t hold your breath) real estate prices at their peak of a
few years ago will not been seen in a decade or more.
What is it that the banks are so afraid of, that they must
force fraud and theft through the courts, just to clear the enormous backlog of
foreclosures? I can only guess that the two year redemption period prior to a tax
deed sale in Florida might be heavy on their minds.
• Tina says:
September 23, 2010 at 8:48 pm
Anyone hear or read about Mealer v GMAC, et al?
• Lit Gant says:
September 30, 2010 at 8:14 pm
http://www.youtube.com/watch?v=naJdGaQdAls&feature=related
• lawgrace says:
September 30, 2010 at 10:42 pm
Commercial and residential foreclosures via deceptive and
fraudulent proceedings enable lenders to repeatedly, illegally flip properties,
and enables falsified IRS form 1099-A’s. Foreclosure fraud is the best means by
which unscrupulous FORECLOSURE MILL LAWYERS deceptively auction and bid (or
insiders bid) and acquire those properties; and some neighborhoods blighted.
Two particular companies “which benefit from fraudulent
foreclosures are Wells Fargo and Freddie Mac. Foreclosure fraud has far
reaching effects on people; for example: UNJUSTIFIABLE HOMELESSNESS, UNFAIRLY
answerable for IRS tax bills, and undue “deficiency judgments.” *more @
• alvaro says:
October 6, 2010 at 10:27 pm
We just went to court and need to get out by October
17,2010.Foreclosure.At firts we made to much the second we did not make enuogh
the third time, well THey said it was to late and we couldn’y do nothing that
the house went to foreclosure and went to auction and GMAC was the owner again.
Then they took us to court..after 10 years we lost our home.
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