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How Serious is the GMAC Problem? Pretty Serious and Not Just GMAC

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The news reports on GMAC Mortgage’s decision to halt evictions and foreclosure sales in 23 states, as originally reported by Bloomberg News, has generated keen interest in the mortgage and securitizaion communities. One reason is the oddly abrupt and broad nature of GMAC Mortgage’s action. GMAC Mortgage subsequently issued a rebuttal of sorts to the article. Not only did it fail to clairify matters, it is inconsistent with the actual notice it sent last week.

Various accounts have described how one officer of GMAC Mortgage’s servicing unit has admitted during testimony that, while he signs thousands of affidavits each month in order to affect steps in the foreclosure process, he does not have personal knowledge of certain critical facts in the affidavit which he asserts to be true. Reader Stupendous Man provided the text of Federal Rule 56 on affidavits (although the cases in question are in state courts, the same principles no doubt apply). Boldface ours:

A supporting or opposing affidavit must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on the matters stated.

The key here is you can’t delegate creating affidavits to parties who weren’t close to relevant matter out of administrative convenience; you need to find people who were directly involved. And evidence in a number of foreclosure suits indicates that this problem not only extends well beyond GMAC, and is not a matter of matter of officers providing affidavits based on a review of copies of the paperwork in a transaction. As one attorney wrote:

It is beyond people signing things when they don’t see the “originals” These people don’t see shit. We have depositions from these folks, the only thing they are able to verify on the documents is what title they are supposed to use, from the particular servicer they are working for – Executive Secretary, Executive Vice President, Asst. Sec., etc…..

So there is evidence to support the notion GMAC was not alone in providing cooked up affidavits. The only question is how widespread this practice was at other servicers.

What are the implications of the GMAC Mortgage actions and how serious are the problems? GMAC Mortgage and similarly situated parties contend that there is nothing fundamentally wrong with their foreclosure process and this is simply a procedural issue which is readily curable. In contrast, advocates for borrowers in foreclosure have indicated that the questionable affidavits are only the “tip of the iceberg” and represent the beginning of the end for the foreclosure mills and the banks, servicers and trustees who have been seeking to exercise foreclosure under false pretenses. The heightened scrutiny and increasing interest by state attorneys general means we may finally get to the bottom of a long-running “he said-she said” dispute.

Let’s review the current state of play:

1. What is the problem with evictions and foreclosure sales that GMAC Mortgage is worried about?

Based on GMAC Mortgage’s press release, the action is limited to evictions and foreclosure sales in certain states, but its new foreclosures are not affected. It isn’t clear exactly what distinction they are making . Presumably, their concern relates to the affidavits they used to initiate the evictions in their foreclosure cases. If the affidavit is flawed, they want to get a new improved one in place before they take title to the property. Similarly, for properties where they have already taken title, if the affidavits which enabled the evictions were flawed, they may need to prepare a new affidavit that would allow them to demonstrate that they have good title prior to selling the property to third parties.

2. Is this problem curable? On the surface, concerns about flawed affidavits used in the eviction process of a foreclosure, seems a technical, legalistic issue. Certainly, GMAC Mortgage’s statements seem to give the impression that the issue is curable and will, in fact, soon be cured. Did GMAC Mortgage prepare the affidavits improperly due to weak procedural controls or economic expediency? If so, then it would seem like they would have to incur some additional cost and take some additional time to have the affidavits properly prepared and then the problem would not be fatal from a legal standpoint. The added expenses and longer time will cost the certificate holders in the MBS more money. Remember, securitizations have come to be modeled and price assuming a streamlined foreclosure process. Actually finding and involving the proper parties in the affidavit process will at a minimum be cumbersome, and could add meaningful costs.

Moroever, it is possible the affidavits were prepared improperly to remedy other problems in the related mortgage loan. If, for the purpose of the foreclosure, the servicer did not have the proper information but stated that they did anyway in the affidavit, this would be a far more serious problem. For instance, if the courts for a foreclosure required a particular party to be pursuing the foreclosure, but GMAC Mortgage did not have documentation supporting such ownership or right, was GMAC Mortgage misrepresenting the facts in the affidavit?

3. Is the problem limited to judicial foreclosure states? That does not seem credible, although GMAC may believe it needs only to remedy it in those states. GMAC Mortgage indicated that the action was only for states that use judicial foreclosure, or similar procedures.

In general, if the issue is limited to improperly documented affidavits, GMAC may be able to limit its response to the 23 states on its list. However, if the underlying documentation for its mortgages have problems in the chain of title, then the improper affidavits are just a manifestation of a deeper issue. By happenstance, I know of cases in a non-judicial foreclosure state not on GMAC’s list where GMAC took similar short cuts. Tom Adams and I have been in touch with a number of attorneys in the foreclosure world who have uncovered problems in non-judicial foreclosure states with inaccurate affidavits, including mis-statements about the parties to the foreclosure, the time of mortgage transfers, the status of the loan file and related issues. There is not good grounds to believe that GMAC had sufficiently different procedures in judicial versus non-judicial foreclosure states to believe their flawed procedures were limited to only judicial foreclosure states.

4. is the problem limited to GMAC Mortgage? GMAC Mortgage and other banks may hope to sell the story line that its problem is limited to a lone “rogue servicing officer.” Unfortunately, the servicing officer in question indicated in his testimony that he prepared 10,000 or more affidavits per month, so it strains credulity to think that GMAC management was ignorant of his actions.

So far, mainstream press accounts have been limited to issues at GMAC Mortgage, which is a large servicer, but only a modest portion of the overall market. However, it is possible, that the root of the problem lies not with the servicer, but started with the sellers and the trustees in the mortgage securitization process. If the mortgage loans were conveyed in the securitization process in a way that clouded the title, the problem could be widespread, and borrower attorneys can provide a large body of evidence from cases in many states. Although GMAC appears to be the party ultimately responsible, it also works very closely with the foreclosure outsourcing firm, Loan Processing Services, so they or the foreclosure mills they retain may also bear some responsibility.

5. Are foreclosure problems limited to this sort of technical issue? The conveyance of real estate has a long legal history and is governed by state law. Numerous checks and balances are written into both the sale and the foreclosure process to ensure that the transfers are conducted properly and disputes over ownership are minimized. Part of the appeal of mortgage loans as an asset, back before the financial crisis, was that the procedures and laws for mortgage loans was well establishes, so owners or investors could take comfort that their interests were well protected.

Unfortunately, there is increasing evidence that the mortgage loan industry went off the rails during the bubble years. And if the issues underlying GMAC Mortgage action are a result of bad origination and closing procedures, rather than poor servicing, the problems may be much larger than inaccurate affidavits.

We will be watching on the GMAC Mortgage situation and related issues. GMAC Mortgage’s remarks today did not clarify matters, and their failure to come clean, and the obvious conflict between the claims in their press release and their own memo suggests other shoes have yet to drop. If these issues extend beyond GMAC Mortgage and inaccurate affidavits, the mortgage industry will be facing some deep and difficult problems.

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63 comments

  1. fresno dan

    “Unfortunately, the servicing officer in question indicated in his testimony that he prepared 10,000 or more affidavits per month”
    there are about 20 work days per month…so 500 affidavits per day. In an 8 hour day, About 60 or so per hour, or 1 a minute.
    Considering all the paper shuffling, retrieving documents, etcetera, not to mention going to get replacement pens as your ink runs out, this was one productive guy!

    1. hermanas

      We’ll see at the tax auctions. Do they give clear title? Does anyone remember “40 acres and a mule”?

  2. attempter

    It’s amazing how many forms of lawlessness were informally enshrined by the bubble and completely dependent upon it, and are now coming unglued. This really is a fundamentally criminal society.

    It seems to belong in satire. The whole bourgeois concept, of which the United States was history’s leading exemplar, is based on “private property”, and the whole “American Dream”/”ownership society” scam was based in particular on becoming indebted to this suburban carport/house. And yet look how easily, how carelessly, how glibly, out of simple gutter greed, the system threw away the whole legal basis of the whole dispensation.

    And now all it will be able to do is add to the already absurd Rube Goldberg contraption of pseudo-legal kludges, to try to prop up its lawlessness. The bank ownership has disappeared down the securitization rabbit hole, and now they’ll be dependent upon Red Queen “justice” in the courts.

    I used these Florida, Wells Fargo, and GMAC examples in my post today:

    http://attempter.wordpress.com/2010/09/21/the-disintegrating-mortgage-front/

    1. Doug Terpstra

      Just a thought writes, “Lawlessness? You’re cutting a pretty big swath with that word.”

      I’d say it’s time someone cut a big swath through Wall Street. The fact that much of their crimes have been sanitized (legalized) through legislative bribery, with malice and cunning, does not exculpate them. In just this narrow case, there is compelling evidence of forgery; quoting from Rep. Alan Grayson’s letter to the Florida Supremes:

      “The New York Times and Mother Jones have both recently reported on the rampant and widespread practices of document fraud and forgery involved in mortgage assignments. My staff has spoken with multiple foreclosure specialists and attorneys in Florida who confirm these reports.”

      Where is the DOJ in any of this? Are there any significant investigations or indictments of mortgage and other financial fraud at the federal level? I don’t get it. What does Obama have to lose in baring his teeth just a little for something other than his formerly winning, now irksome smile?

      1. attempter

        It’s clear that Obama is both politically incompetent and truly loathes and despises the people.

        The latter contibutes to the former, as he can’t help repeatedly expressing his contempt in semi-public, most recently at one of his brazen elitist fundraisers.

        So those are the reasons he’s unwilling to throw his base even a few shreds of meat, and unable to even pretend.

  3. Terry

    It is obviously just a problem with the affidavits based on GMAC actions and the testimony of the one official. Instead of just checking the computer to see deliquency status prior to signing the affidavit, the signer will be required to go through a checklist to show that the affiant has “actual knowledge” as to all factual claims contained in the affidavit.

    As for the old cases, I doubt that a court would set aside all the foreclosure actions – instead GMAC and their lawyers might be writing checks to state AGs to settle “fraud” claims.

    Looks like a sloppy process was used, as show by the testimony, which can be fixed.

    1. psychohistorian

      Nothing to see here.

      No structural problems here. Everything is hunkee doree!

      Move on now, nothing more to see….

      (/snark)

    2. LeeAnne

      Maybe you could inform us so clearly on other GMAC actions -other than the insignificance of this particular -um, sloppiness?

      Like this Although GMAC appears to be the party ultimately responsible, it also works very closely with the foreclosure outsourcing firm, Loan Processing Services, so they or the foreclosure mills they retain may also bear some responsibility.

      Care to comment?

    3. Doug Terpstra

      That’s right. Like the “little rough patch” on Wall Street (GWB), this is just a typo or two, a fat-finger mistake, just a slip in otherwise savvy business practice.

      The important thing is to look forward not backward. Most of the commenters here are just stuck in the politics of envy and class warfare. Wall Street bankers, like those screened for Obama’s town hall, have had just about enough of “being wacked like piñatas”. They give and give and get no respect.

      Or, see Rep Alan Grayson letter to the Florida Supreme Court (here on NC):

      http://www.nakedcapitalism.com/2010/09/grayson-calls-on-florida-supreme-court-to-halt-foreclosures.html

    4. LeeAnne

      This tale could have made a nice little article in the magazine section of the New York Times.

      Forget economic theory. Economic theory is the busy work of academe and related media outlets, journals and think tanks that serve the interests of the banking industry.

      The powers that be in academia put their imprimatur on economic ‘theory,’ select and indoctrinate its high priests to teach it, and with a host of media players grinding out arguments pro and con this and that, provide legitimacy sufficient for cover of banker objectives, which is to control the disposition and annuity streams of pension fund assets and related financial services.

      By Reagan’s time, the baby boomer consumer demographic had been sliced and diced, showing exponential growth of pension fund investment assets clearly. Pension fund assets would become the nation’s store of wealth. The government was bound to control this store of wealth some way-some how.

      Wall Street got there first. And, not content with income streams from servicing and serving up the pension fund assets of individuals and leveraging it up to high stakes gambling levels, they spied another opportunity to consolidate capital and their winnings; the homes of individuals.

      Incorporation would protect the assets of financial services and banking corporate executives; while they, with players all over the western world, actively and aggressively mobilize resources; money and politicians, to challenge every law in place since the 1929 financial and social disaster, created and effective to protect consumers of financial services; primarily rules that required transparency in the creation and offerings of investment products. They succeeded.

      Now corporations and the wealthiest individuals own and control the US government and the election process.

      To insure that this corporate takeover of the US government remains and grows, a corrupt US Supreme Court has RULED, just in time for the warm-up to the 2012 presidential elections, that as individuals with the human rights of free speech, corporations have the right to financially contribute to election campaigns in unlimited amounts of money.

      Can that be allowed to stand? The Supreme Court of the United States has lost its right to supremacy as arbiters of the rights of the free citizens of the United States.

    5. Nathanael

      Unfortunately, the “sloppy process” was a total failure to track the ownership of any of the loans. The same loans have shown up in multiple trusts backing different MBS… etc.

      Given that sloppy process, there is no cure. It will prove impossible for GMAC (or anyone else) to prove that they are holders.

  4. topguncrdtadvsr

    This isn’t just a minor snafu that includes GMAC. This is a systemic fraud by all of the banks.Even worse the judges I believe are at the helm of letting this continue to happen.

    They know that most don’t understand it enough to defend themselves. Then there are defense attorneys for the homeowners who already sold their soul if they had one to the FRAUDSTERS.

    I live in MO a NON-JUDICIAL STATE. By trying to stop the madness and tell the TRUTH as I understand it you wouldn’t believe the outright corruption I’ve faced at all levels for understanding it.

    I actually used to think the truth meant something. All they show is how corrupt they are if you truly know what the hell their doing. That they do get by with providing false evidence, outright removing adversaries out of a so called court of competent jurisdiction.

    The only competence they have is to STEAL STEAL STEAL! My video reinforces what I know. Maybe everyone should as to have my file pulled since I got two recusals then another corrupt judge!

    http://www.youtube.com/watch?v=8VDTAIqOouM

    GOD BLESS US LITTLE PEOPLE TO KEEP OUR SANITY!

  5. Siggy

    As GMAC has acted, I assume that the problem is serious and systemic. I suspect that the core of the problem is the absence of recodation each time the note/mortgage-deed of trust is assigned. It would be inetersting to know what the records of MER would reveal with respect to the serial assignment of any particular note. Also, once bundled, in a subsequent assignment, is the individual note specified?

    To read of this mess is my moment of schadenfreude. I just love it when the bankersters are hoist on their own petard.

  6. fog Horn Leg Horn

    It’s called a rubber stamp, and in one trial, the document that purported to “convey” the mortgage and the note was 5 different rubber stamp signatures – not a drop of wet ink on the page.

    If that wasn’t enough, I have now read a deposition of one of the “rubber stamps” who says, under oath, that when she became a “corporate vice president” that her company made dozens of stamps of her signature and passed them out to all of the record custodians, so that any one of them could stamp whatever was needed.

    If you have ever aspired to be a corporate vice president at a bank, this one makes $10 bucks an hour. Rubber stamps don’t give you carpal tunnel or writers cramp, especially if you aren’t operating the heavy machinery yourself. And at the volume these people are doing daily, there is no way that they could verify what they are attesting to, even if they had access to it.

  7. NS

    Thanks Yves for your posts about this. Utterly and completely amazing mess of magnitude no matter what comes next. I suspect the mess is much larger and includes more than Ally, GMAC. I’ve been dazed and amazed as I watch TBTF companies owned by the government become full service bankers including AIG. Everyone gets to be a banker, even if their business isn’t banking. Meanwhile, small banks are failing and/or being gobbled up in consolidation of the too small to care about as they had to compete with the high finance sharks at a gigantic disadvantage. But oh no, Glass-Steagall was ‘old fashioned’ and served no positive purpose did it?

    I can’t help but think this is predatory behavior in seeking the weak marks (unaware/uninformed people) sanctioned by government in an effort to repair balance sheets on both ends. Its a mind blower.

    There are many outstanding questions, legal and otherwise, which I expect will be stonewalled as opacity also appears to be sanctioned in this ‘free market’.

    The board members, executive officers of these ‘institutions’ are getting paid uber-mega bucks at GM, Ally, AIG, etc. I wanna know what GS number they fall under as even the POTUS isn’t compensated as luxuriously.

    Where is my dividend check? Can I vote as a shareholder? Can I even get a discount on govt owned homeowners/auto insurance? This is sick and twisted. Socializing losses, privatizing gains/profits for ‘illionaires is killing us. But the remedies that would have worked when there was an opportunity couldn’t be done because THAT was socialism! That being temporary receivership and restructuring. Oh horrors.

    If one of us ‘little people’ performed fraud at a fraction of this scale, where would we be?

    My head explodes more regularly these days as just when I think I’ve seen it ALL, it gets worse.

    1. LillithMc

      Thanks for the tip on Christine Springer. I think we are only seeing the tip of the iceberg on the mortgage mess.

  8. john cruise

    Read Christine Springer’s blog:this has been going on
    since Day1,you have a lot of catching-up to do.
    SHE’S THE BEST!ENJOY

  9. spiritussanctus

    Document fraud from these mills goes beyond affidavit forging and includes fraudulent allonges and fraudulent assignments.

    Assignments are required to transfer ownership from one entity to another. When mortgage security trading was at its peak, it was not uncommon for mortgages to be transfered 3-6 times in a year. Unfortunately, many of the security companies and banks that claimed ownership of these mortgages then and now did not bother to get a chain of title from one entity to the next.

    So these same document mills that are forging affidavits are also forging thousands of “assignments” made after the fact. Many of these employees serve as “Vice Presidents” of dozens of banks within a three month period with no sign of their position in any of the banks online literature or official records.

    If you’re looking for more information on document forgeries, a source a lot of these linked articles site is http://frauddigest.com/ which has a lot of good information in those pdf articles.

    1. Cbones

      No, don’t lump foreclosed house titles with the still good titles.

      by themosmitsos
      on Mon, 09/20/2010 – 21:29
      #593802

      Tyler, I believe it’s related to the TYPE of Deed the Lender is taking possession of as a result of the foreclosure proceedings and hence later conveying through the REO as seller.

      I know FOR A FACT in IL, Lenders in REO sales like to convey “indirect deeds” [Quit Claims/Deeds in Lieu/Special Warranty Deeds] rather than direct clean Deeds with unequivocal “free & clear title” and chain of title from them [Lender REO] to you [buyer], unless the buyer asks for, and is insistent in pursuing that, ie “Warranty Deed.” I’ve had RE deals go sour over REO dept’s refusal to close my purchase at Chicago Title & Trust even when I’m offering to pay the $1k cost [I shit you not!], rather than some shady secondary Title Co … often the attorney’s. With this trick, usually and at minimum, they’re trying to fuck you on the back RE taxes.

      IT IS STANDARD PRACTISE BY LENDERS AFTER FORECLOSURE TO *NEVER* TAKE FULL TITLE & REGISTER W/LOCAL GOVERMENT … excuse being the cost. However …

      In Illinois [everywhere] these types of Specially conveyed indirect deeds pass liability onto the purchaser because the Lender never FULLY took title but is ASSINGING you his rights. I’ve seen, for example, LONG after a case is closed, a defendant’s appeal filed & pursued, yes unsuccesfully, but against the NEW buyer as well as the Lender, post REO.

      I know the GMAC situation is related to this because I can contrast this process w/foreclosure in Federal Court in Illinois, where the Lenders’ REOs always have a DIRECT deed [Warranty] they’re giving you as purchaser, not some form of title they’re conveying to you.

      Illinois State Law has very protective laws in place for individuals under foreclosure and State law is very sensitive to chain of title, title custody, and jurisdiction, while these are issues the while a step that 7th District Federal Judges scoff at. Lender’s claims to this effect [chain & custody] always suffice via the very existence of a loan.

      I also know that Wisconsin & Indiana State Law in part have some of the same quirks/loopholes [on the list], and that Texas State Law does not [not on list].

      Hence, I think it’s related to the case where the servicer was found guilty of fraud, which sets a precedent regarding the establishment of chain of title & title custody, as it was also concurrent.

      For ex, note that the States which do NOT recognize Special Warranty Deeds are not listed by GMAC

      http://www.lawchek.com/resources/forms/que/deeds.htm

      ………………………………………….

      An example:

      You have *NO* idea of the shit REOs try to pull. People are fucking retarded. Once at a closing I got into a 3 ½hr argument w/the Closer, Seller’s [REO] atty, AND MY ATTY because the fucking RASPA didn’t add up and $12,5k of my money was missing. I was right. This, at Chicago Title & Trust no less………The house I’m in RIGHT NOW writing this, I bought in foreclosure in 2002 and the Lender tried to fuck me on the taxes. SIX MONTHS *AFTER* closing, I found out the Seller [Lender/REO] had NOT paid [released] the $17k in back taxes held at the closing because the seller’s atty conveniently hadn’t filed the paperwork, and we needed to close that day. Closed where? TICOR/Attorneys’ Title Guaranty Fund [I REALLY wanted the property]. Deed? Special Warranty. Where would the tax $$ go if not paid and unclaimed after 12mths? Back to the seller. They can’t pull this shit if they give DIRECT title [was special deed] and if they close for ex at Chicago Title, because then CT would be holding the $$ in escrow, and NOT ATGF.

      Best I can do :)

      To clarify: Leaves new buyer, and hence Lender’s REO on countersuit, exposed to liability by/through this new precedent setting case. It is IRRELEVANT whether the porperty would’ve ultimately been foreclosed anyways. If they commit fraud on title, what about on resale value and equity for ex? Normally this might not concern their legal departments [probably would anyways], but the amount of cases we’re talking about here is voluminous and the legal fees would be substantial even to prove themselves within their original rights.

      * Login or register to post comments

      by Charley
      on Mon, 09/20/2010 – 21:36
      #593854

      http://4closurefraud.org/2010/09/20/breaking-gmac-freezing-all-foreclosu

  10. CaitlinO

    The message I’m taking away from this is that we will never ever buy or allow our loved ones to buy, a home sold after 2003.

  11. CuiJinFu

    I feel like I’m missing something here. Many of the commenters are quick to describe this as fraud, but I’m struggling to see that. There’s no doubt that lenders got very sloppy with their paperwork and may not be following the letter of the law, but is anyone asserting that they don’t ultimately have legal title to these properties?

    I’d be more inclined to say that borrowers using this issue as a delaying tactic are guilty of fraud. They know they don’t have rights to the house and are just using legal maneuvering to delay the inevitable foreclosure. The only winners in this mess will be the lawyers.

    1. spiritussanctus

      Well, you can’t claim you own a house you collect money and eventually foreclose on if you never do the paperwork. It is also absolutely correct to call it fraud when fake documents are created by fake officers of banks (low-wage employees at document mills) who then illegally backdate the document to claim ownership.

      It isn’t alright to say “Well, they meant to sell this to us and we bought it,” that’s just not the way property works. Intended purchase is not the same as a purchase….

      even if you believe that homeowners “deserve it” for taking out more than they could pay. That belief begs the question: why were banks, run by experts in finance, reimbursed for unsound investments while homeowners are expected to burden the cost of that same speculation? Especially as we discover that some of this speculation and manipulation was willful.

      Much of this is still to play out and we’ll see how widespread this problem is. I’m patient, so I’ll wait about two years and see what happens. Sending myself a future e-mail (http://www.futureme.org/) now… check back in with this later.

      1. CuiJinFu

        There’s no doubt that they need to do the paperwork, but it’s not fraud unless they’re falsely asserting ownership of the asset. I have yet to see any reports of banks foreclosing on a property that they didn’t have a legal claim on, although in a lot of cases it’s difficult to document that claim.

        You seem to be asserting that borrowers should be allowed to get their houses for free because the lenders are “bad”. The truth is that it’s not just banks foreclosing on these properties…the nature of securitization is that these borrowers are cheating pension funds and individuals, not just banks.

        The fact that banks got bailouts is irrelevant to this issue. I really wish none of the bailouts had taken place and we’d just let the market sort out the fates of the speculators, but two wrongs/bailouts don’t make a right.

        1. Mike

          It’s not that borrowers in default should “get houses for free,” it’s that they should be liable to the proper and deserving parties. If I default on my loan and surrender my house to the wrong party in foreclosure, that doesn’t help me at all; I’m still liable to whomever actually holds my note.

          1. CuiJinFu

            First of all, there’s no indication that your theoretical scenario of being foreclosed on by multiple parties has any relevance here. All that appears to be happening is lenders are cutting corners with regard to proving their legal claims, but there’s no reason to believe the claims aren’t valid.

            Why does it matter who the borrower cedes the property to anyway? If some lender forecloses, they assume title to the property. If another lender then pops up asserting a foreclosure claim, they’re legal battle is with the current title holder and not the original borrower.

          2. Mike

            It matters because joint and several liability may be the rule, depending on the jurisdiction. If the wrong party ends up with your house and then goes bust, the right party can come along later after the borrower.

            And this is not theoretical. Read Alan Grayson’s letter to the Florida Supreme Court a few posts below this one, which references a case where Chase tried to foreclose on a house when the note was owned by Fannie Mae. There’s nothing archaic or hypertechnical about these standing and procedure requirements, either. The rules exist for a reason.

        2. elmatto

          You are missing the bigger picture. The Banks took the investor money, then sold loans on terms that they knew would default. They knew they were selling loans that were guarenteed of defaulting. Then they got companies like AIG to sell insurance on those loans. It all worked smashingly, until the real estate prices collapsed. Yes, borrowers were given the hard sale. Now, the problem is the banks are trying to get the houses for free by fraudulently foreclosing on property that they never lent any money on.

    2. Jason

      Here you go
      http://www.scribd.com/doc/29925105/Gmac-Mortgage-LLC-v-Debbie-Visicaro-Et-Al

      the whole thing is an amusing read, but the key section is this statement by the Judge:

      I was beginning to recite to the lawyer what I had typically recited, that there was no affidavit in opposition. And the lawyer said, “Well, I thought you might want to see this,” and handed me some documents which were from another file in our circuit, and it turned out, it was the _same note and mortgage_ that was in a separate and independent file.

      There was a different plaintiff pursuing a foreclosure proceeding on the same note and mortgage as the one that was being proceeded on. Both of the cases contained allegations in the original complaints that the separate plaintiffs were owners and holders of the note. Both of them had gone so far to have affidavits filed in support of a summary judgment whereby an individual represented to the court in the affidavit that the separate plaintiffs had possessed the note and had lost the note while it was in their possession.

  12. Goin' South

    Somebody needs to explain to me why this problem is limited to foreclosures. With the unreliability of the MERS system, isn’t every release of a mortgage filed in the MERS era subject to question?

    1. fog Horn Leg Horn

      Absolutely. This is NOT a MERS only issue. As spiritussanctus has said, the fraud goes way beyond affidavits for foreclosure. It does include allonges and assignments.

      If you are unaware of what an allonge is, that is because they sort of fell out of vogue around 1892. It is a “back from the dead” type document that some clever bankster dug up. It purports to be an “extra sheet” in the mortgage note that moves the note from one of the missing parties to the next. Typically, they are just a sheet of paper with the loan number, and a handful of rubber stamps.

      Assignments are for those who chose not to attempt an allonge. They only move the note to one party, and they too, are typically not dated, signed by a “robo-signer” who is an executive VP for every bank that is a MERS member, and has no actual knowledge of anything, other than this document just showed up on their desk with a request for a signature.

      The best we have seen so far is testimony from a foreclosure lawyer – on the stand – that she signed an assignment, for a company that she is NOT a corp. vp for, and that went bankrupt before she got out of law school.

      Mers is a single pebble in the avalanche we currently call the foreclosure crisis.

      1. Nathanael

        Legally, allonges are only supposed to be used when the original mortgage pages are literally full of transfers.

        Which means the alleged allonges in most of these cases are illegal.

        Assignments are perfectly legal…. but not fraudulent, backdated assignments signed by people with no authority to assign….

    2. Nathanael

      Yes. Look up the David G. Mills case.

      http://www.scribd.com/doc/21619196/I-am-an-attorney-so-I-decided-to-sue-my-lender

      (There are some other links to it elsewhere.)

      He realized that he had no evidence that he was paying the correct person and that his mortgage release would not prevent other parties from claiming that he owed them. So he sued his lender in a quiet title action.

      Unfortunately, the judge didn’t want to deal with it and declared it “not ripe” (he’s appealing last I read).

      Anyone with a mortgage in MERS;

      and anyone whose mortgage has been transferred to a different lender, with the “servicer” remaining the same, without a proper set of paperwork proving that the servicer has the right to collect for the new noteholder;

      will probably need to file quiet-title actions to get clear title to their house.

      It’s a huge mess. It’s probably the biggest cloud on land title in US history since the thefts from the Native Americans (those clouds are still outstanding, of course, but the US and State governments as the primary thieves would have to compensate the claimants in almost all of those cases — not true here).

      I’m glad my house was bought in cash from someone else who bought it with cash from a builder who bought the land with cash; the last mortgage was cleared back in the 1970s before all this garbage.

  13. Lyle

    The problem of releases cures itself by the adverse possession laws. By having the release you have the equivalent of a color of title (not an actual title but something that walks like and talks like it). If in addition you pay the taxes due after some period of years the claim becomes barred by the various states adverse possession laws. Yes it may take a visit to court to clear but… So while at most it could take 25 years the problem will correct itself.
    It appears that all in all the mortgage industry got very sloppy as it got fat and happy. It will only become a problem if title companies start objecting to earlier releases.

  14. Hugh

    As some of us have been saying for a long time now, this is the great unexploded mine lying out in there in the middle of the real estate market. It’s not just foreclosures. What does this mean for all those CDOs and CDS out there? What does it mean for the Fed’s balance sheet, or Fannie and Freddie’s?

  15. scharfy

    Yikes….

    We are gonna need a entire generation of lawyers to sort through this mess.

    This is a clusterf^&ck of the highest order.

    Its amazing that something as simple AND valuable as an IOU gets lost in the shuffle. The wonders of securitization.

    Anyway here’s the simple fix:

    You fail to pay for a house(the owner) – you’re out.

    You fail to produce legal claim to house(the Bank) – you’re out.

    House gets auctioned on ebay, proceeds go to cover that states budget gap.

    In lieu of a proper legal claim to a home, de facto owner is the STATE.

    Eminent Domain for the housing bubble.

    If I were governor of Florida, and some bank OR a citizen tried to own a house without proper claim, I’d snatch the house and either auction it or lease it out and create revenue for the state…

    Imperfect, morally acceptable, and doable.

    1. Nathanael

      Under ancient English law, when the legal title to the house was sufficiently clouded by messes like this, clear title was generally given by the courts to the *TENANT*, on the grounds that the person living there had the greatest interest in maintaining the property, etc.

      Imagine what that would do for the country…

  16. Andy

    After a steady stream of lis pendens week after week in my zip code, the action suddenly stopped after 8/27. I wondered whether data just wasn’t being reported.

    Now I wonder if a lot more than GMAC have screamed “Stop the presses!”

    1. Lyle

      A question occurs, if the industry really wanted to fix it could they not by making the counties rich by filing lots of assignments. Hire folks to get the companies in the chain or their bankruptcy agents to do the paper work, and send them to the courthoses for recording.

      1. Nathanael

        Yeah. But they don’t want to fix it. MERS was invented specifically to cheat counties out of mortgage recording fees — it says so right there on its website.

  17. Ericmcsquare

    I believe what GMAC is reacting to is the practice of having managers at the servicers execute three important documents when they have no idea as to whether or not what they are attesting to is correct: 1) the assignments into the name of the foreclosing entity; 2) verifications of the information contained in the foreclosure complaint and 3) affidavit of amount due when a summary judgment motion must be filed or final judgment must be applied for.

    These documents are almost always created by non-attorneys who do not really care if they get the names or numbers correct as long as they get it off their desk.

    Just to give you an idea of the number of documents which have mistakes in them (both minor and major mistakes), I once had to attend a creditors rights meeting in which a partner of a foreclosure firm in NJ/PA boasted of a 93.7% accuracy rate related to his firms affidavits. In response, I congratulated him on only committing legal malpractice 6.3% of the time. I then immediately began looking for another job and am glad I got out when I did.

  18. Superdave Otto

    The issues swirling around the fraudulent paperwork is just the tip of the iceberg. The 800 lb. question the banks won’t or can’t explain or answer is what happened to the note or financial interest of the loan once it passed through the MERS portal and was securitized, sliced, diced, and resold numerous times. Could there be dozens of entities that could at some point in the future claim ownership to any loan in question? Can title companies guarantee clear titles? Were any of these loans already paid off by insurance or TARP funds? MERS was the key part of the set up that allowed Wall St. to achieve it’s goal of creating as mnay mortgages as possible in order to create the mortgage backed securities that they sold to investors.

  19. scraping_by

    One interesting aspect is that GMAC and the other banksters are fighting to get hold of a wasting asset. The money elite are twisting and squirming to keep real estate selling prices artificially high (hiding the true inventory numbers, $8000 federal gifts, constant uptalk) but can do little more than slow the fall.

    The ultimate source of money bidding for houses is middle class salaries. Thinking about that should be sobering to anyone selling. Econ 101 – meaure demand in dollars and see how the supply is priced.

    The banksters are trying to catch a falling knife. They’re fiddling the law not out of contempt for the legal system, though like the rest of us, that’s where they’ve arrived. They’re not into some right wing Randist distain for mere rules. They’re not one and all dipwads and place fillers. The banksters are cheaping out on expenses because the revenue’s not going to be there in the end. The houses they’re lying to get will be worth less than the cost of tearing them down.

  20. Justicia

    At the start of the mortgage debacle James Galbraith called for examination of the mortgage tapes (documents) to assess the value of the bundled assets. To no avail. This is from his testimony in May before the Judiciary sub-committee:

    Fraud at the Root of the Financial Crisis
    http://gregpytel.blogspot.com/2010/09/james-k-galbraith-fraud-at-root-of_1256.html

    “The complexity of the mortgage finance sector before the crisis highlights another characteristic marker of fraud. In the system that developed, the original mortgage documentslay buried – where they remain – in the records of the loan originators, many of them since defunct or taken over. Those records, if examined, would reveal the extent of missingdocumentation, of abusive practices, and of fraud. So far, we have only very limited evidenceon this, notably a 2007 Fitch Ratings study of a very small sample of highly-rated RMBS, which found “fraud, abuse or missing documentation in virtually every file.” An efforts a year ago byRepresentative Doggett to persuade Secretary Geithner to examine and report thoroughly onthe extent of fraud in the underlying mortgage records received an epic run-around.”

  21. Michel Delving

    Fraudulent mortgage assignments preceeded these ferkocta affidavits creating nightmarish chain of title issues. Realtors are being openly cautioned in short sale seminars about liability for participating in fraudulent conveyances. It won’t be long before title insurers refuse to insure REO, FC and even short sales once their underwriters investigate these exposures.

    1. Horace Maneur

      “If title passing needs to have title insurance and the closing is an REO sale or is a purchase from a foreclosure sale, title insurers may be fearful of insuring into a lawsuit since there is a distinct and not remote chance that the foreclosure judgment could be set aside.

      As of this writing no insurance company has made the announcement that it will not insure REO or foreclosure sale properties- but wait a few days after the underwriters start to examine this new risk. The inability to obtain title insurance will certainly inhibit the private purchase of property at foreclosure sales and from REO inventory where the property was acquired by foreclosure sale.”
      http://mattweidnerlaw.com/blog/2010/09/what-does-the-gmac-announcement-and-notices-of-withdraw-mean/

  22. Jay Banks

    This serious matter lasts for quite long period of time and nobody does anything about it. We should make the system work for people not opposite. We should strictly avoid the corruption and fraud at least by the law. That is the only tool that the government has legally in hands. They should have to use it with bright wisdom to truly served ordinary people. But we should keep our promises and regularly pay our debts then everything will work properly…

  23. fs247

    Can anyone explain exactly how Lender Processing Services (LPS) winds up bearing responsibility here (as indicated in the original post)?

    “Although GMAC appears to be the party ultimately responsible, it also works very closely with the foreclosure outsourcing firm, Loan Processing Services, so they or the foreclosure mills they retain may also bear some responsibility.”

    I understand how LPS works with GMAC and other banks/servicers, but I guess I don’t understand the full context of LPS’s liability. Does LPS process the affidavits, and could they potentially be linked to a fraud charge? Is there some issue with LPS’s work on the title side?

    Any help/info greatly appreciated. Thanks.

  24. AnonymousDriveby

    Yves,
    Re: “And if the issues underlying GMAC Mortgage action are a result of bad origination and closing procedures, rather than poor servicing . . .”
    It’s ALL of the above. Servicers are submitting court documents that aren’t true and haven’t been verified by anyone. What Stephans and other robo signors are doing is rubber stamping mortgage servicing fraud.

  25. GeekGirl

    You bet they are going to chase them down in judicial states because that is where they are scrutinized. The non judicial states rubber stamp the non judicial foreclosures – so the judicial states are left out until someone starts really pushing the issue there. Most judges in non judicial states rely on rules established to expadite foreclosures under deeds of trust but they must also follow the real rules of commercial law which say that any foreclosing party must be a party at interest – must show proof of not just being a holder but being the rightful holder entitled to the underlying asset and THAT is where it is all going to come undone because the evidence to prove ownership and to prove their right to foreclose does not exist.
    That’s why GMAC is only stopping actions in judicial states. Watch and see – it will change when the sea change comes to the non judicial states.

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