Ohio Judge Demands More Information in Robo-Signed Foreclosure Cases

One major battleground over how robo-signed documents will be treated is the courtroom of Ohio state court judge Nancy Margaret Russo. She had ordered GMAC to appear before her on Monday to provide her with "proof of integrity of all documents submitted" in a foreclosure case. The proof was needed because GMAC filed the case against James Renfro using documents executed by the infamous robo-signer Jeffrey Stephan. Since the issues weren't resolved on Monday, Russo ordered swift but significant discovery and scheduled a full hearing on February 17, 2011.

The impact of the case may be broad because Ohio Attorney General Richard Cordray has gotten involved.

Ohio AG Accuses GMAC of Bad Faith

Last week, the AG filed an amicus brief asking that judge Russo sanction GMAC for submitting the Stephan-signed documents. Then, at Monday's conference, he filed a supplemental brief accusing GMAC of bad faith. Cordray argued that filing the Stephan document in the Renfro case was an act of bad faith because, when it was filed, GMAC was already withdrawing Stephan's documents as flawed in Maine.

Cordray isn't content to stay on the sidelines as merely a friend of the court, however. He will be filing a motion to intervene in the case by Tuesday. GMAC will respond, possibly objecting, by November 15th.

Cordray urges the judge to deny GMAC the right to foreclose because of the "bad faith" filings. But rather than give Renfro a free house, Cordray wants the judge to use the threat of sanctions to compel GMAC to give Renfro a meaningful, principal reduced mortgage modification.

Despite the AG's arguments, Judge Russo said she has not prejudged the Renfro case or any other. Nor would she make blanket statements about the appropriateness of sanctions, merely noting that sanctions would depend on the facts of each case.

Man Keeps Home After BofA Fails to Show Up

At least GMAC did not make the same mistake that Bank of America (BAC) did last week -- fail to appear. On Nov. 3, Judge Russo had ordered Bank of America Home Loans to appear with its counsel at a similar meeting, but the bank didn't show. Its lawyers did appear and claimed BofA couldn't provide accurate documents until December. The judge told BofA's lawyers that her order said Nov. 3, not December. BofA had a choice: face a contempt of court order or Russo would vacate the foreclosure judgment against the debtor, William Novak. BofA agreed to vacate the foreclosure.

As a result, Novak now lives in his house without a threat of imminent eviction. Before Judge Russo's evidentiary process began, his foreclosure sale had been scheduled for Oct. 12. BofA is free to start the foreclosure process over, whenever it can get its documents in order. But it will have to start from scratch.

So Far, Several Problem Document Cases a Week

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Judge Russo has two other pre-trial conferences to get at the truth of foreclosure documents scheduled for Nov. 8. She says that since she began this procedure a couple of weeks ago, she's been holding eight or nine a week. She does these in cases where the foreclosure has happened -- final judgment was entered -- but the property hasn't been sold yet and either the debtor belatedly challenges the documents or the foreclosing bank proactively steps forward and acknowledges a problem with the documents. This process stops the sale for however long it takes to resolve the issue. In Renfro's case, that's at least a couple of months.

Debtors typically object only if the debtor has counsel, and most aren't represented. Judge Russo commends the banks for proactively identifying problem cases, but admits she doesn't know if the banks are successfully identifying all of them because she does not know what process they are using to find such cases. In the Renfro case, it was GMAC that initially asked to stop the foreclosure sale.

AG Cordray Wants Injunction Barring Robo-Signed Stephan Docs From GMAC

In a lawsuit filed by AG Cordray against GMAC that is unrelated to the Renfro case, Cordray has asked for an injunction that orders GMAC to stop using documents signed by Jeffrey Stephan and to seek to invalidate all pending foreclosures involving Stephan documents. The injunction would also order GMAC to tell the AG about all foreclosures it is involved in, regardless of whether Stephan documents are involved. Given how hard Ohio has been hit by foreclosures, that's sure to be a lot of cases.

Judge Russo notes the "elephant in the room" is all the previously foreclosed properties, residential or commercial. How many of them have clouded title now, because the documents underlying their foreclosures were invalid? Chief Magistrate Steven Bucha said that no cases challenging the validity of completed foreclosures had yet been filed, but he expected them to come; he was a bit surprised he hadn't seen any yet. If he's right, the foreclosure mess will increase by another order of magnitude.