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Wednesday, September 22, 2010

Ally Financial: being up front means having nothing to hide...with the exception of foreclosure documentation

Ally Financial, Inc.
"Being up front means having nothing to hide"
...with the exception of foreclosure documentation

By Robbie Whelan
The Wall Street Journal

They are called robo-signers, putting their names on thousands of documents tied to mortgages facing foreclosure. Now, under pressure from borrowers, banks are halting foreclosures where the documents are signed by these employees.

This week, mortgage-servicing giant GMAC Mortgage Co. halted foreclosures in 23 states due to questions about documents signed by one of its robo-signers, Jeffrey Stephan.

Until now, Mr. Stephan was an anonymous middle manager whose job is to sign affidavits, assignments of mortgages and other documents that establish a bank's ownership of a mortgage, thus giving the bank the right to foreclose.

But, as revelations come to light about how Mr. Stephan and other robo-signers do their jobs, a picture is emerging of a foreclosure process that critics say is just as flawed as the lax lending and perverse incentives that created the lending crisis.

In two sworn depositions given by Mr. Stephan over the last 10 months, he said that assistants brought as many as 500 documents a day to this desk at GMAC's office in Fort Washington, Pa. Some months, he would sign more than 10,000 documents related to home foreclosures. By signing the documents, he was stating that he had personally reviewed the details of each case.

The problem is, according to depositions Mr. Stephan gave in December and June, he didn't really look at each case. In fact, he assumed that all the details were correct, and just signed off on each one. Mr. Stephan also noted that, when he joined GMAC in 2004, he went through a training program that lasted three days.

"It just corrupts the entire process of justice when you have people signing documents as if they have personal knowledge of processes or information that they don't have knowledge of," said O. Max Gardner III, a South Carolina consumer bankruptcy lawyer who represents borrowers in these types of cases.

Now, lenders have begun withdrawing the affidavits signed by Mr. Stephan, thereby ending dozens of foreclosure proceedings across Florida, Maine and Texas. Many lawyers who represent borrowers in foreclosure have argued that the banks trying to repossess these homes don't have the standing to do so, and are seeking to block the actions.

On Monday, GMAC confirmed that it suspended foreclosure sales and evictions in 23 states so that it can investigate its foreclosure procedures. Link to complete article

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