GMAC Stops Foreclosure Evictions, Cites Problems with Affidavits

<"">GMAC Mortgage, the fourth largest home loan lender in the US, has halted foreclosure evictions in 23 states and has disclosed that some of its employees had been allowed to sign affidavits without a notary present or without verifying that some information was true. GMAC is still investigating the scope of the problem.

According to a report in The Palm Beach Post, a two-page memo dated September 17 and marked “urgent” told brokers to immediately stop evictions, cash-for-key transactions, lockouts and to suspend sales of properties already taken back by the bank in foreclosure. All of the states mentioned in the memo require foreclosure actions to begin in court.

According to a New York Times report, GMAC may have been forced to reveal the wrongful foreclosures following several depositions given by Jeffrey Stephan, the team leader of the document execution unit in the lender’s Fort Washington, Pa., offices. In one deposition, Stephan said that he signed as many as 10,000 affidavits and other foreclosure documents a month; in another he said it was 6,000 to 8,000.
Those affidavits assert that Stephan had examined “all books, records and documents” involved in the foreclosure and that he had “personal knowledge” of the relevant facts. However, Stephan admitted that he did not do this. Stephan also admitted that his signature on affidavits had not been notarized when he wrote it, but only later, or even the next day.

According to a report on Bloomberg News, GMAC may not be the only mortgage lender dealing with wrongful foreclosures. A JPMorgan Chase & Co. executive also said she signed thousands of foreclosure documents on the bank’s behalf without personally checking loan records, according to a deposition she made in a court case in Palm Beach, Florida, in May.

According to the Bloomberg report, the rapid rise in home loan defaults is to blame for such sloppiness in foreclosure proceedings. In August, lenders took possession of a record 95,364 homes and issued foreclosure filings to 338,836 homeowners, or one out of every 381 U.S. households, according to RealtyTrac. About 2 million houses will be seized by lenders through 2011. Lenders and mortgage servicers have been unprepared for the volume.

Mortgage services and lenders are now bracing for more legal action contesting foreclosures because of the press attention brought about by the GMAC debacle, Bloomberg said. One attorney who provides legal representation to people facing foreclosure told Bloomberg that he expects a class-action suit will be filed against GMAC and other lenders seeking damages and to stop foreclosures.

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