GMAC temporary halts foreclosure proceedings

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GMAC Mortgage has temporarily halted foreclosure proceedings on homeowners in 23 states including Florida, New York, Illinois and Ohio in a "corrective action" that may also delay closings on some bank-owned (REO) homes.

Closing dates on all REO sales will be extended by 30 days, with buyers having the right to cancel their purchase agreement and get their deposit back.

With the exception of North Carolina, all 23 affected states are "judicial foreclosure" states, requiring lenders to obtain a court order before initiating foreclosure proceedings. That's led to speculation that GMAC Mortgage wants to make sure it can prove it is the noteholder on loans it forecloses on before initiating legal action.

In some judicial foreclosure states, troubled homeowners have challenged lenders foreclosing on them to prove that they have a right to collect on the debt by producing a mortgage note.



GMAC Mortgage has temporarily halted foreclosure proceedings on homeowners in 23 states including Florida, New York, Illinois and Ohio in a "corrective action" that may also delay closings on some bank-owned (REO) homes.

Closing dates on all REO sales will be extended by 30 days, with buyers having the right to cancel their purchase agreement and get their deposit back, Bloomberg News reported, citing a Sept. 17 internal company memo.

With the exception of North Carolina, all 23 affected states are "judicial foreclosure" states, requiring lenders to obtain a court order before initiating foreclosure proceedings. That's led to speculation that GMAC Mortgage wants to make sure it can prove it is the noteholder on loans it forecloses on before initiating legal action.

In some judicial foreclosure states, troubled homeowners have challenged lenders foreclosing on them to prove that they have a right to collect on the debt by producing a mortgage note.

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing.

The Florida attorney general for example is investigating whether documents produced in court by attorneys representing lenders have been "fabricated" by affiliated companies outside the U.S.

A spokesman for GMAC Mortgage parent company Ally Financial Inc. told the Washington Post that the company is reviewing its foreclosure procedures in 23 states, and removing states from the list once it's determined that procedures comply with company policy.

The spokesman said it has no evidence that the proper procedures were not followed in any individual cases.

The affected states are: Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

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JPMorgan Suspending Foreclosures
Published on 10-01-2010

Source: The New York Times

In a sign that the entire foreclosure process is coming under pressure, a second major mortgage lender said that it was suspending court cases against defaulting homeowners so it could review its legal procedures.

The lender, JPMorgan Chase, said on Wednesday that it was halting 56,000 foreclosures because some of its employees might have improperly prepared the necessary documents. All of the suspensions are in the 23 states where foreclosures must be approved by a court, including New York, New Jersey, Connecticut, Florida and Illinois.

The bank, which lends through its Chase Mortgage unit, has begun to “systematically re-examine” its filings to verify that they meet legal standards, a spokesman, Tom Kelly, said.

Last week, GMAC Mortgage said it was suspending an undisclosed number of foreclosures to give it time to take a closer look at its own procedures. GMAC simultaneously began withdrawing affidavits in pending court cases, throwing their future into doubt.

Chase and GMAC, in their zeal to process hundreds of thousands of foreclosures as quickly as possible and get those properties on the market, employed people who could sign documents so quickly they popularized a new term for them: “robo-signer.”

In depositions taken by lawyers for embattled homeowners, the robo-signers said they or their team had signed 10,000 or more foreclosure affidavits a month.

Now that haste has come back to haunt them. The affidavits in foreclosures attest that the preparer personally reviewed the files, which those workers acknowledge they had no time to do.

GMAC and Chase say that their lapses were technical and will soon be remedied with new filings. But defense lawyers are seizing on these revelations and say they will now work to have their cases thrown out.

Beyond the relative handful of foreclosure cases being contested are many more in which the homeowner did not have legal counsel. Potentially, hundreds of thousands of cases could be in doubt.

GMAC’s initial disclosures prompted challenges or investigations from attorneys general in Iowa, Illinois, Colorado, California and North Carolina. The Treasury Department, which became the majority owner of GMAC after providing $17 billion in bailout money, has directed the lender to correct its procedures.

The pressure on the lender, which began as the auto financing arm of General Motors, is continuing to increase. Senator Al Franken, Democrat of Minnesota, asked Wednesday for the Treasury, the Justice Department and other regulators to collaborate on “a thorough investigation into the alleged misconduct.”

Defense lawyers have consistently complained that the lenders’ law firms were sending through cases that were at best sloppy. The Florida attorney general’s office says it is investigating four so-called foreclosure mills.

“The GMAC announcement was the mushroom cloud,” said one Florida defense lawyer, Matthew Weidner. “The fallout will burn through the entire mortgage servicing industry.”

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Oct 3 (Reuters) - Amid growing concerns about the legal practices of mortgage lenders, Old Republic National Title Insurance told agents Friday it would stop insuring homes foreclosed by JPMorgan Chase & Co (JPM.N), The New York Times reported Saturday, citing a company memo.

Old Republic, one of the nation's largest title insurers, said it would not write policies on foreclosed Chase properties until "objectionable issues have been resolved," according to a company memo obtained by the Times.

Officials from Old Republic and Chase could not be reached immediately for a comment.

Minneapolis-based Old Republic last week said it would not insure properties foreclosed by GMAC Mortgage. Old Republic is a unit of Old Republic International Corp (ORI.N)

GMAC and Chase have halted all foreclosures in the 23 states where they need a court's approval. Bank of America on Friday said it would stop all pending foreclosures in those states.

When house foreclosures are done with faulty documentation, new owners could be vulnerable to ownership claims. Title insurers agreed to protect buyers against defects or errors in the title.