There have been so many U.S. home foreclosures that loan servicers have had trouble keeping up with the paperwork. That may provide a glimmer of hope for some who are fighting to keep their homes.
It turns out that Ally Financial, which operates GMAC Mortgage, may have employed a robo signer" to plant the signature of company executive Jeffrey Stephan on thousands of foreclosure documents. But there's just one problem; the law required Stephan to read the document and sign it in the presence of a notary public.
In sworn deposition for a lawsuit by a homeowner challenging her eviction, Stephan admitted he didn't do either one.
In fact, Ally Financial was being snowed under in foreclosure paper. A reported 10,000 documents crossed Stephan's desk each month, all requiring him to read and sign them.
Shock wave
The revelation this week that he took a shortcut sent a shock wave through the financial industry, prompting reports that Ally Financial had stopped all foreclosures in 23 states. The company says that's not the case.
The speculation likely emanates from a direction previously given
by GMAC Mortgage to certain of its outsource vendors to allow time to
address a potential issue that was raised in a number of existing
foreclosures challenging the internal procedure we used for executing
one or more judicially required forms, the company said in a
statement.
This direction was to suspend evictions and REO closings
where the related foreclosure could have been impacted by the same
internal procedure. We are also reviewing certain previously
completed foreclosures where the same procedure may have been
used.
While the lenders may have had legitimate cause to foreclose, the mishandling of the paperwork has given homeowners ammunition in their fight against foreclosure and has drawn the attention of state law enforcement officials.
No comment
We are unable to comment on the specific merits of the challenge because some of them are in litigation, Ally Financial said. Nevertheless, a new process has already been developed and implemented so that though some existing foreclosures may experience delays while corrective action is taken, there will be no interruption in new foreclosures. These delays are expected to be resolved within the next few weeks and certainly before year end, without serious consequence.
Ally Financial says GMAC Mortgage has been addressing the procedural challenge for more than three months and that its mortgage business is operating as usual.
Attorneys representing homeowners may see it differently. The Washington Post reports that some of the nation's largest mortgage companies also used the GMAC processor, perhaps opening the way for further challenges.
