It’s nearly impossible to keep up with the firehose of attention the national media are giving the Stephan/GMAC/Ally foreclosure scandals, so I’ll just do a quick summary of some recent articles:
The Washington Post: Ally Financial legal issue with foreclosures may affect other mortgage companies
Jeffrey Stephan was required to review cases to make sure the proceedings were legally justified and the information was accurate. He was also required to sign the documents in the presence of a notary.
In a sworn deposition, he testified that he did neither.
The reason may be the sheer volume of the documents he had to hand-sign: 10,000 a month. Stephan had been at that job for five years.
In sworn depositions taken in December and June for two separate court cases involving families trying to keep their homes, Stephan revealed his shortcuts when reviewing the files. He said he would glance at the borrower’s names, the debt owed and a few other numbers but would not read through all the documents as legally required. He would then sign them. The files were packed up in bulk and sent off for notarization several days later.
At the rate Stephan was reviewing files, if he worked an eight-hour day he would have had an average of only 1.5 minutes for each document.
The New York Times: GMAC Halts Foreclosures in 23 States for Review
The law firm seeking to withdraw the affidavits is Florida Default Law Group, which is based in Tampa. Ronald R. Wolfe, a vice president at the firm, did not return calls. The firm is under investigation by the State of Florida, according to the attorney general’s Web site.
Mother Jones: A Crack In Wall Street’s Foreclosure Pipeline?
[S]tate officials, experts, and foreclosure defense attorneys say there’s a lot more going on—and that the ramifications of GMAC’s decision could send shockwaves throughout other big banks, mortgage servicers, and possibly the entire foreclosure industry.
The controversy surrounding GMAC hinges, in large part, on a single employee and statements he made in several depositions in the past year. Jeffrey Stephan oversaw a team of more than a dozen employees whose job it was to “execute”—i.e., sign—foreclosure documents. This included reviewing crucial affidavits used in foreclosures, including what’re called summary judgment affidavits, the final hurdle in seizing somebody’s home in a court-handled foreclosure. In a June deposition (pdf), Stephan said his outfit handled 6,000 to 8,000 of these documents each month. Yet under questioning, Stephan all but admitted, under oath, that he didn’t really read those crucial documents or know what they precisely said
The problems resulting from Stephan’s statements are likely one of the causes for GMAC’s recent announcement.
The Wall Street Journal: GMAC Spotlight On ‘Robo-Signer’
Now, lenders have begun withdrawing the affidavits signed by Mr. Stephan, thereby ending dozens of foreclosure proceedings across Florida, Maine and Texas. Many lawyers who represent borrowers in foreclosure have argued that the banks trying to repossess these homes don’t have the standing to do so, and are seeking to block the actions.
Todd Zwicki, a professor of real-estate finance at George Mason University, said the revelations about Mr. Stephan and other alleged robo-signers could have a wide range of repercussions, “from being a gigantic monkey wrench in the works, to being something really small.” Judges might stop accepting foreclosure filings if there is any question of the accuracy of the documents, which could cause holdups in the process of working through millions of homes nationwide going through foreclosure.
“The kind of facts that you’re talking about here are the facts that judges don’t like—this kind of assembly-line paperwork pushing with no oversight. There’s good reason for lenders to be worried about here, if they misstep,” Mr. Zwicki said.
The Florida attorney general is investigating three law firms for allegedly providing fraudulent affidavits that identify who holds the original mortgage note in foreclosure cases. In Florida and in other states, this document allows lenders to bypass a costly trial and proceed with a foreclosure.
Two of the three firms being investigated — the Law Office of Marshall C. Watson and the Law Offices of David J. Stern PA — have represented GMAC in foreclosure proceedings. And the person who signed many of these allegedly false affidavits was an employee of GMAC.
The American Bar Association Journal: GMAC Suspends Foreclosures in 23 States After Questions About Legal Paperwork
The move by GMAC Mortgage follows increasing questions about whether legal paperwork in the Sunshine State—and three high-volume law firms there that helped prepare foreclosure documents—have complied with court requirements, reports the Palm Beach Post.
Details of what, exactly, the issue may be are scarce, but the Florida Default Law Group has been withdrawing affidavits in GMAC foreclosure cases in Florida that may have been inaccurate, the Post says.
And here’s the kicker: Lenders knew about this problem long ago… and sat it on. How many families are now homeless because of GMAC’s refusal to do the right thing?
The Washington Post: Ally knew of faulty GMAC documents weeks before eviction moratorium
Ally’s GMAC mortgage unit briefed one of its customers, Freddie Mac, on Aug. 25 of the problem. Freddie Mac halted evictions on Sept. 1. But Ally did not take steps to freeze evictions and foreclosures until Sept. 17, the report said.
I think we’re about to see the whole house of cards come tumbling down—and if the courts think they’re backlogged now, just wait until they see the wave of lawsuits from wrongfully-evicted foreclosure victims.