Yesterday, five homeowners in the state of Maine filed a class action suit against GMAC Mortgage, accusing them of filing knowingly false certifications for foreclosure, and false affadavits which back up the documents. Maine is one of the 23 states where judicial sign-off is required to move ahead with a foreclosure, and where GMAC (now Ally Financial) has suspended evictions.
In depositions of GMAC/Ally officials as well as those at top mortgage lenders across the country, employees have admitted that they do not spend any time verifying the accuracy of the foreclosure documents, and often use a “robo-signer” who looks at the materials for less than 30 seconds and signs up to 10,000 affadavits a month.
The lawsuit alleges that thousands of Maine homeowners have lost their homes unfairly due to judgments based on false documents, and that most of them had no attorney operating in their defense. GMAC has been sanctioned in a Maine court for their “high-volume and careless approach to affidavit signing.” Local attorneys, along with the offices of Maine Attorneys Saving Homes, the National Consumer Law Center and the Center for Responsible Lending are working on the case.
Bank of America, the largest holder of mortgages in the country, yesterday admitted to this practice and suspended foreclosure processes while they review the documents. They plan to “amend all affidavits in foreclosure cases that have not yet gone to judgment,” a process that could take months or even years. Citi and Wells Fargo, the only major lenders which have not slowed their foreclosures yet, have defended their documentation actions, with Wells Fargo standing by the accuracy of their affadavits. If all lenders eventually submit to review, it could put on hold the future of 4.37 million households either in foreclosure or severe delinquency.
The lenders often just service the loans, without owning the title. Private investment pools or even the government, in the form of Fannie Mae and Freddie Mac, often own the homes. Sometimes the owner cannot be determined because of securitization and sloppy processes during the housing bubble, leading to foreclosures by servicers who cannot establish ownership.
Connecticut, a judicial foreclosure state, has suspended all foreclosures for 60 days while the Attorney General investigates. California, a non-judicial state, has asked GMAC/Ally and JPMorgan Chase, another lender reviewing their documents, to halt their foreclosure operations. Asm. Ted Lieu, the state legislator who wrote the law that requires lenders in California to try to contact borrowers and document the outcome before any foreclosure, said yesterday that the state should call for a foreclosure moratorium.