Posted on Wednesday, September 22, 2010
I’ve had 78, count them, 78 telephone calls today about the mess with GMAC foreclosures. And that’s nothing compared to the size of the mess itself. This case is not entirely unlike the one being investigated by the Florida A.G. already. Firm staff signed documents reflecting themselves as officers of the lender or stating that they had verified the accuracy of information (such as possession of the original Note or appropriateness of the chain of ownership of a loan, when in fact they had not. The Rules of procedure are pretty specific about this sort of thing.
If this were a single was it would, of course, be much easier to handle and make predictions about. But these cases were created over and over – sometimes 10,000 a month by a single employee – at at least 4 firms that we know of. In addition to the shear number of cases, the problem is compounded by the fact that these cases are all at various stages in the foreclosure process. Some are still being foreclosed. Others have been foreclosed and are pending sale to REO buyers. And still others have already been sold and are likely already occupied by the new happy homeowners. If this were a single case, the wronged homeowner would typically decide whether or not it was worth fighting and, if so, file a motion to vacate the foreclosure judgment. But this is not a single case and so the solution may not be that simple.
Innocent purchasers may end up filing claims against their title insurer which might, in turn, end up pursuing those who prepared the fraudulent documents. Who knows how these cases will play out.
In the mean time, those in mid-foreclosure process will get a ‘hall pass’ for extra time. It could be weeks. Or it could be months. It’s doubtful these cases will result in any homeowner who has defaulted under the loan getting off scott free, but there may be sanctions against the offending firm. There may be remedies that eventually lighten the homeowners’ loads. And, no doubt, there will be lawsuits (in fact there already are) by borrowers counsel which may eventually end in settlements and money back to homeowners.
How many of the 12,000 plus homes that went into REO last month in Florida are impacted, for example, no one yet knows. Given that GMAC is the 5th largest lender with $350 billion in loans throughout the US, even if this only impacts 23 states where the judicial foreclosure process was to have been followed, the numbers will still be big.
So what’s a homeowner to do? First, if you are in foreclosure or your home was recently foreclosed and GMAC was your lender/servicer or one of the firms involved in this case or the A.G. investigation was the lender/servicer’s firm (those firms are Shapiro Fishman, Florida Default Law Group. Marshall Watson, or David Stern) and you want to fight, unfortunately it is probably not a case you want to fight without a lawyer, so if you don’t already have one, you will probably want to hire one. For some tips on how to get help without getting taken, check our that Blog topic on this site. How do you know if one of these firms handled your case for the bank? Easy, just look on any of the pleadings, their name will appear at the end.
We fully expect cases like this involving other firms to emerge. The problem is that lenders and services, including our very on Fannie Mae and Freddie Mac, put these firms under a lot of pressure to crank work out fast and on very low profit margins. In fact, the firms often are fined if the case does not proceed quickly. Of course that’s no excuse for producing fraudulent documents, but it does offer one explanation as to how something like this could happen in the first place.