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 Monday, September 20,

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affidavits have been withdrawn in Florida and a number of notices of false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”

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

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 


• 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.


• 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.


• 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… 

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 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

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


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Posted by 4closureFraud on June 19, 2012 · 3 Comments






In re: U.S. Bankruptcy Court Southern District of New York

Bankruptcy Petition #: 12-12020-mg


Debtor-Residential Capital, LLC aka Residential Capital

Subsidiary List – See Attached Exhibit A


1177 Avenue of the Americas

New York, NY 10036


Tax ID / EIN: 20-1770738


Robert Brown, a consumer attorney based in New York will
bring the motion for an Official Borrower Committee in the Residential Capital,
LLC bankruptcy case. He has experience in lender liability litigation and
bankruptcy practice.


Robert E. Brown, Esq.

Law Offices of Robert E. Brown, PC

44 Wall Street