Much discussion has been made on the subject of mortgage fraud. The common assumption was that the perpetrator of the fraud was the customer or possibly the mortgage broker. We now learn that the real fraud has been committed by the banks themselves. It may not have been intentional, but the effect is still the same.
We have frequently posted about the MERS problem and its’ consequences. Foreclosures have now taken a sudden turn that may halt all foreclosure actions for a long time. GMAC has announced that they are halting all foreclosures in 23 states.
The problem finally came to a head in Florida.
On September 14, 2010, Florida Default Law Group filed “Notices” in foreclosure actions that the firm was withdrawing Affidavits it had previously filed. The Affidavits were signed by Jeffrey Stephan of GMAC Mortgage/Homecomings Financial in Montgomery County, PA. Stephan had previously admitted in depositions that he signed thousands of such affidavits each month with no knowledge of the contents and in many cases without even bothering to read the Affidavits.
Stephan further admitted in deposition that these affidavits were NOT witnessed by a notary as was required by Florida law.
GMAC finally recognized how large the problem was and stopped the foreclosures. If this is so, thousands of foreclosures across the country were fraudulent and consequently, not valid.
. It appears that these states are primarily judicial foreclosure states.
These are the states where judicial foreclosures are more common and in which the lender has to appear before a judge and obtain a court order before initiating foreclosure proceedings against the delinquent borrower. They tend to have much longer foreclosure timelines than non-judicial states. What is striking about the list of states in the GMAC announcement is that all but one (North Carolina) are judicial states. Also, all judicial states in the country but one (Delaware) are in the GMAC list. This would hint at some potential issues with judicial states that is driving the GMAC directive.
Since Nevada is a non-judicial foreclosure state, we are not immediately affected. I would expect, however, that the foreclosures in Nevada will slow significantly, at least until the dust settles.
It would not surprise me to see some of the foreclosures, even here in Nevada, overturned. The question then is what happens to the foreclosure buyer who has already spent a lot of money to rehab the property and quite possibly then sold the property to an end user. I want to stand very clear of that situation.
Read more here.
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