Mortgage Services May Face Fraud Charges in New Jersey

Another state may be preparing legal action against mortgage
servicers for not properly reviewing and verifying documents before
foreclosing on homes. New Jersey says it's investigating to determine
whether servicers violated the state's Consumer Fraud Act.

The State of Ohio last week filed a lawsuit against GMAC Mortgage,
based on an employee's sworn deposition that he did not always review
and sign foreclosure documents, as required by law.

New Jersey has asked mortgage companies to provide documentation on
how they have performed foreclosure filings. The state also has
contacted the National Association of Attorneys General to discuss
collaborative efforts.

"I'm concerned that what some are calling 'shortcuts' in the filing
process may in fact be a systemic pattern of fraud committed in our
state court system," New New Jersey Attorney General Paula T. Dow
said. "These companies have a legal obligation to follow procedures
before they attest to the facts."

Revelations that started it all

Ally Financial, formerly known as GMAC Mortgage, announced two
weeks ago that it was imposing a moratorium on foreclosures in 23
states, including New Jersey, after disclosing that its employees
routinely signed off on foreclosure affidavits without properly
reviewing them or verifying their accuracy. JP Mortgage Chase and Bank
of America have since announced similar halts to foreclosure
proceedings.

Last Friday BoA expanded the foreclosure halt to all 50 states. Dow
believes more lenders should consider taking that action.

"I'm asking all mortgage holders who are in the foreclosure process
to pause, review their procedures, and ensure that all statements that
they attest to are, in fact, properly reviewed and confirmed as being
accurate," Dow said. "New Jersey homeowners who are facing the trauma
of foreclosure and eviction are entitled to no less."

In New Jersey, foreclosure actions must be supported by an
Affidavit of Amount Due, which establishes the identity of the
mortgage/note holder and information concerning the default. GMAC
Mortgage admitted that, due to the crushing number of foreclosure
documents required for filing, employees sometimes took shortcuts.

"We want to know what past practice has been, and if we find the
Consumer Fraud Act has been violated, we expect the companies to
reform their business practices and to help any affected homeowners,"
said Thomas R. Calcagni, New Jersey's Acting Consumer Affairs
Director. "The large number of mortgage defaults and foreclosure
procedures that have occurred is no excuse for denying borrowers due
process."

White House cool to moratorium

Meanwhile, a White House advisor over the weekend dampened
speculation that the Obama Administration would press for a full
moratorium on home foreclosures. David Axelrod, interviewed on CBS
Face The Nation Sunday, questioned the need for a complete halt,
saying some foreclosures are justified and should go forward. Doing
so, he said, will ultimately help the housing market recover.

"Our hope is this moves rapidly and that this gets unwound very,
very quickly," he said.

However, a growing number of Democratic lawmakers, facing
re-election next month, have called for a complete stop to home
foreclosures. Lawmakers have also urged bank regulators and the
Justice Department to investigate whether mortgage companies violated
laws in handling foreclosures.