Foreclosure Freeze: GMAC's Ally Financial Halts Cases in 23 States

Ally Financial, a unit of GMAC Mortgage, again faces charges that employees did not verify foreclosure documents and will delay tens of thousands of foreclosures in 23 states. Ally was sanctioned for this in 2006.

Ally insists there is no moratorium on foreclosures, but does say it suspended evictions and REO closings that may have the same problems as those that were corrected after the 2006 court case.

While Ally would not comment on current allegations because they are still in court, it said a new process is already in the works, delaying some existing foreclosures but not affecting any new foreclosure actions. It expects to resolve the problem by the end of the year.

The new set of problems were exposed by attorneys at Ice Legal. During a deposition, it was discovered that Ally employees were signing off on affidavits in foreclosure cases filed with the court without personally verifying the information or signing the documents before a notary.
In the deposition, Christopher Immel, an attorney for the West Palm Beach, Fla. firm, questioned Jeffrey Stephan, a GMAC employee who had the job of signing foreclosure documents. Immel calls these types of employees at loan servicing firms "robo-signers."

"Basically when you're signing 10,000 documents, that obviously doesn't give you too much time to review a complaint or a case file," Immel told NPR. "He just is signing them, relying on the accuracy of somebody else having put those numbers in."

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In 2006 case, GMAC was sanctioned by Florida Circuit Court Judge Bernard Nachman because the company "submitted false testimony to the court in the form of affidavits of indebtedness." The company was ordered at that time to confirm that its policies had changed.

After that case, GMAC's legal department issued a statement telling employees "not to sign verifications of court pleading documents unless you have independently reviewed and checked the facts." Yet a GMAC employee said in his deposition that he and his team of 13 people signed about 10,000 affidavits and other foreclosure documents each month without verifying their accuracy. The supervisor of this employee is the same executive sanctioned in the 2006 case, Bloomberg reports.

Experts told Bloomberg that judges could dismiss the foreclosures, sanction the attorneys and company, or levy a financial penalty.

Ally Financial was the fourth-largest U.S. home-loan originator during the first six months of 2010, originating $26 billion in mortgages. It's also the fifth largest loan servicer, with a $349.1 billion portfolio. It got a $17-billion bailout from the government. So far, the Treasury Department has refused comment on this story.

Anyone who lives in a state that requires judicial foreclosures and who has a mortgage serviced by Ally Financial should contact an attorney if you are facing foreclosure. Even if you are in a nonjudicial foreclosure state, you may want to seek legal advice to be sure all the paperwork involving your foreclosure is accurate.

Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask to Avoid Foreclosure."

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