States Step Up Pressure on Disputed Foreclosures

Ohio Attorney General Richard Cordray ratcheted up the "robo-signed" foreclosure controversy today by requesting an injunction that would bar GMAC Mortgage LLC from completing any Ohio foreclosure sales based on faulty affidavits.

In Arizona, Attorney General Terry Goddard called on the legislature to enact a Borrowers' Bill of Rights that would crack down on unscrupulous mortgage servicing activities.

Cordray filed suit October 6 against GMAC; its parent, Ally Financial Inc.; and one of its employees, Jeffrey Stephan.

According to the lawsuit, GMAC and its employees committed fraud on Ohio consumers and Ohio courts by signing and filing at least hundreds and potentially thousands of false affidavits in foreclosure cases.

The fraud came to public light after Stephan testified in depositions out of Florida and Maine that he signed thousands of affidavits without personal knowledge or verifying the content.

The preliminary injunction, which is part of the lawsuit against GMAC/Ally, asks that GMAC stop its faulty affidavit practices while the lawsuit is pending.

"These so-called 'robo-signed' affidavits disrespect the courts and the private property rights of homeowners," Cordray said. "As we seek to uncover the extent to which GMAC used such tactics, we are taking this action today to make sure that these faulty affidavits are no longer used in foreclosure proceedings."

Cordray, who through his action against GMAC/Ally was the first attorney general in the nation to take legal action to confront the emerging robo-signing problem, joined attorneys general from all 50 states Wednesday in announcing a multi-state investigation of the mortgage industry over faulty affidavits.

Arizona action

In Arizona, Goddard said the foreclosure abuses that have come to light "have hurt Arizona homeowners and our economy."

Under the Bill of Rights, borrowers would have the right to:

•  Receive timely and accurate responses to good-faith borrower inquiries;
•  Receive clear information on how to avoid foreclosure;
•  Pursue loss mitigation or loan modification negotiations whenever possible;
•  Not have their home foreclosed during loan modification negotiations; and
•  If and when foreclosure becomes necessary, to have such foreclosure based on accurate documents, verified by someone with personal knowledge of the information contained therein.

The Borrowers' Bill of Rights would also make any violation of its provisions an unlawful practice subject to investigation and prosecution by the Attorney General under Arizona's Consumer Fraud Act.

Goddard added, "It has become clear we need enforcement power to ensure that servicers live up to their commitment to their customers. The bill I am proposing today would give borrowers these important rights."

Hundreds of Arizona borrowers have filed complaints with the Arizona Attorney General's Office concerning abusive practices of their mortgage loan servicers.  

Despite federal efforts to encourage loan servicers to modify loans of borrowers at risk for foreclosure, consumers continue to complain of lenders failing to respond to their requests, misrepresenting the length of time the loan modification process will take and pursuing foreclosure while a loan modification is pending.

Goddard is one of 12 Attorneys General on the Executive Committee of the Multi-State Home Foreclosure Investigation announced on Wednesday.