Ally, GMAC foreclosures based on faulty documents, more states say

GMAC headquartersConnecticut, Ohio and North Carolina have joined the ranks of states investigating foreclosures by Ally Financial's GMAC Mortgage unit after an employee said in court documents he rubber-stamped thousands of foreclosure affidavits.

Connecticut Attorney Richard Blumenthal announced on Monday that his office is investigating defective foreclosure documents filed by GMAC in his state and called on the company to freeze foreclosures there.

"I am demanding a freeze in all GMAC/Ally foreclosure actions to forestall horrendous, illegal harm against homeowners," Blumenthal said in a statement. "The GMAC/Ally foreclosure steamroller should be stopped so the company can be held accountable. My office has already confirmed that some defective documents were filed in Connecticut."

On Tuesday, Ohio Attorney General Richard Cordray said he is asking state courts to undertake a special review of all foreclosure cases that involve GMAC Mortgage. "Many Ohioans are struggling to remain in their homes and are in absolutely desperate situations," Cordray said in a statement. "It is critical that all involved in the foreclosure process recognize the dire circumstances of these Ohioans and protect the integrity of the system through careful vigilance."

Also on Tuesday, North Carolina Attorney General Roy Cooper announced his own investigation into questionable foreclosure tactics by the mortgage lender. Investigations into GMAC foreclosures have already been launched by attorneys generals in Illinois, Iowa, and Texas, following news reports last week that GMAC was halting evictions in 23 states.

Although California was not on that list of affected states, Attorney General Jerry Brown issued a statement labeling GMAC's foreclosure review process a "sham" and demanding that it cease and desist from foreclosing on Californians until it can prove compliance with state law.

GMAC released a statement last Friday blaming foreclosure "defects" on a "procedural error" it says was identified and rectified several months ago.

"Regrettably, a procedural error was found to have occurred in certain affidavits required in certain states," GMAC said in a statement. "The error is not related to the accuracy of the underlying transaction or the ultimate decisions to have exercised the foreclosure proceedings."

According to GMAC, problems with some affidavits involved the failure of employees to:
  • Sign affidavits in the physical presence of a notary public
  • Sign affidavits without direct personal knowledge of all the information stated in the affidavit
Although the company says it has temporarily suspended evictions and post-foreclosure closings in 23 states while it conducts a review, "GMAC Mortgage is not suspending foreclosures in any state."

The story first made headlines when a GMAC employee, Jeffrey Stephan, admitted in sworn depositions that he signed off on more than 10,000 foreclosure documents a month without personally reviewing them, as required.

According to a report in the Washington Post, hundreds of mortgage companies, such as Fannie Mae and Freddie Mac, that used GMAC's processing services are conducting internal investigations of their own foreclosure processes. The problems with GMAC, one of the nation's largest mortgage lenders, may also be related to an investigation by Florida's Attorney General into law firms handling foreclosures.

The ripples from the scandal may also spread to the remaining other 27 states and the District of Columbia, the Post reports, since Stephan also signed off on foreclosure documents in each of them, and some that are coming to light appear to be forged or faulty.

GMAC, the nation's fourth largest mortgage lender, was founded in 1919 as the General Motors Acceptance Corporation (GMAC) to finance the purchase of automobiles. Thanks to multiple and controversial federal bailouts totaling $17.2 billion, the U.S. Treasury owns a majority stake in the company.
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