Image via WikipediaInitial reports were that GMAC had stopped foreclosures in 23 states. GMAC then issued the following response:
"Recent reports have stated that GMAC Mortgage instituted a moratorium on all residential foreclosures in 23 states," the statement said in response to media reports saying that the lender had imposed the moratorium. "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."
What Gives and Where is this Going!!!!!!
Various accounts have described how one officer of GMAC Mortgage’s servicing unit has admitted during testimony that, while he signs thousands of affidavits each month in order to affect steps in the foreclosure process, he does not have personal knowledge of certain critical facts in the affidavit which he asserts to be true.
Why is this a problem? 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.
What are the implications of the GMAC Mortgage actions and how serious are the problems? GMAC Mortgage and similarly situated parties contend that there is nothing fundamentally wrong with their foreclosure process and this is simply a procedural issue which is readily curable. In contrast, advocates for borrowers in foreclosure have indicated that the questionable affidavits are only the “tip of the iceberg” and represent the beginning of the end for the foreclosure mills and the banks, servicers and trustees who have been seeking to exercise foreclosure under false pretenses. The heightened scrutiny and increasing interest by state attorneys general means we may finally get to the bottom of a long-running “he said-she said” dispute.
NOT SO FAST
Consumer protection attorneys have for years claimed that finance companies and their servicers have been playing fast and loose with the rules. Specifically, there are have been allegations that almost all foreclosures were tainted by assignments and alonges (the documents that transfer ownership) that were fraudulently signed, not at the time of assignment, but to effectuate the foreclosure.
SECURITIZATION MAKES MATTERS WORSE
Think of it like this. During the boom, mortgages are being pumped out faster than oil in the gulf coast. Those mortgages were being assigned faster than Bernie Madoff could steal money and being cut into pieces faster than an onion on a Ginsu knife commercial. Those pieces were being securitized and resold on Wall Street. No one thought that loans for 120% of the value of the property would ever go down and anyone would ever default. They were making money so fast they never thought they might have to comply with the law and actually LEGALLY assign the paper.
So, the paper ends up in securitized trusts (a legal entity) governed by New York trust law, i.e. legal requirements must be met before it goes into the trust--like actual assignments.
HERE COMES TROUBLE
Then one day someone has to foreclose. In order to foreclose you must prove that you actually own the paper.
MAKE IT UP AS YOU GO
In order to get paid, servicers must actually foreclose on the property. Many lawyers have argued that these entities literally had people sit in rooms all day and sign affidavits and assignments so that the properties could be foreclosed.
IS THIS THE END OR JUST THE BEGINNING
GMAC Mortgage and other banks may hope to sell the story line that its problem is limited to a lone “rogue servicing officer.” Unfortunately, the servicing officer in question indicated in his testimony that he prepared 10,000 or more affidavits per month.
IF YOU BELIEVE THIS WAS NOT AND INSTITUTIONAL PROBLEM, I HAVE A PYRAMID SCHEME I WOULD LIKE TO SELL YOU.
Chris Hellums is the managing shareholder of Pittman Dutton & Hellums. He is currently litigating wrongful foreclosure cases. He can be reached toll free at 866-515-8880 or by e-mail at Chrish@pittmandutton.com