GMAC Mortgage, a unit of Ally Financial, is moving forward with foreclosure proceedings using disputed affidavits, despite saying last week that it would halt evictions and sales of repossessed properties until it completed an internal review of its procedures.
The controversy, which has prompted investigations into GMAC by the Attorneys General of Illinois and Texas, underscores a larger problem facing the US housing industry: record keeping has not kept pace with the explosion of mortgage originations and securitisations that took place during the housing boom.
As a result, many lenders are finding that they do not have the legal documents required to foreclose on delinquent borrowers.
“The financial industry became cavalier about the documentation and paperwork underlying these loans,” says Christopher Peterson, an associate dean for academic affairs and law professor at the University of Utah. “That has resulted in a recipe for not knowing who owns what.”
The issue highlights the problems faced by banks as record numbers of homeowners fall behind on mortgage repayments.
In the days before loans were packaged into securities and sold to investors, a mortgage was filed with the local county land registry and those records were updated each time the loan changed hands, creating a tangible paper trail.
Securitisation allowed mortgages to be transferred among owners, known as securitised trusts, much more frequently. Banks were either unwilling or unable to keep up with the paperwork, according to scores of lawsuits brought by homeowners who say they were improperly foreclosed on.
Compounding the problem is an electronic registry – Mortgage Electronic Registration Systems – developed in 1997 by the big banks in conjunction with Fannie Mae and Freddie Mac that lawyers for these homeowners say has complicated the process.
Carmella Lejarde, MERS spokeswoman, says that any borrower who has one of the 64m loans registered on their system can easily find out the owner of his or her loan. But she also says sometimes the owners “opt out,” meaning that MERS does not have to disclose anything about them. “That puts borrowers at a huge disadvantage,” says Prof Peterson.
Documentation is an issue in a foreclosure case making its way through Maine’s State Superior Court. According to an affidavit filed by GMAC employee Jeffrey Stephan, GMAC owned both the mortgage and note, giving it the right to foreclose on the property.
But Thomas Cox, a lawyer for the homeowner, says the loan is actually owned by Freddie Mac, the government-owned mortgage finance company.
Mr Stephan has said in depositions that he signed 10,000 such affidavits a month without verifying the accuracy of the information contained in the documents. GMAC has said that it does not believe the affidavits contained factual inaccuracies.
January 28th, 2014
In the State of the Union address tonight, President Obama is going to call for a national minimum wage of $10.10. Then in their response ...
January 21st, 2014
My New Year's Day op-ed in the New York Times seems to have kickstarted a discussion about how to make Obamacare better. I hope you ...
December 18th, 2013
This morning it was announced by the Library of Congress and the National Film Preservation Board that my first film, 'Roger & Me', has been ...
December 14th, 2013
[View the story "Michael Moore Tweets on Eve of Newtown Anniversay" on Storify]
November 9th, 2013
Click here for this week's full schedule for the State Theatre and Bijou by the Bay in Traverse City, Michigan. The day has arrived. For ...
September 10th, 2013
[View the story "John Kerry's Accidental Diplomacy" on Storify]
July 30th, 2013
Today Bradley Manning was convicted on 20 of 22 counts, including violating the Espionage Act, releasing classified information and disobeying orders. That's the bad news. ...
September 11th, 2010
OpenMike 9/11/10 Michael Moore's daily blog I am opposed to the building of the "mosque" two blocks from Ground Zero. I want it built on ...
December 14th, 2010
Yesterday, in the Westminster Magistrates Court in London, the lawyers for WikiLeaks co-founder Julian Assange presented to the judge a document from me stating that ...
May 12th, 2011
"The Nazis killed tens of MILLIONS. They got a trial. Why? Because we're not like them. We're Americans. We roll different." – Michael Moore in ...
November 22nd, 2011
This past weekend I participated in a four-hour meeting of Occupy Wall Street activists whose job it is to come up with the vision and ...
September 22nd, 2011
I encourage everyone I know to never travel to Georgia, never buy anything made in Georgia, to never do business in Georgia. I will ask ...
December 16th, 2010
Dear Swedish Government: Hi there -- or as you all say, Hallå! You know, all of us here in the U.S. love your country. Your ...
November 2nd, 2010
This letter contains (almost) no criticisms of how the Democrats have brought this day of reckoning upon themselves. That -- and where to go from ...