GMAC Mortgage Halts Evictions, Foreclosed Home Sales

Sept. 22, 2010— -- In April, Luis Fitzgerald and his wife Miriam were, in his words, "literally kicked out" of the foreclosed Orlando, Fla., home they purchased a decade ago.

In Florida and other states with judicial foreclosure laws, banks must file a summary judgment motion in order to take possession of a property where the owners have defaulted on a loan. The motions must be backed by an affidavit from a "witness" who has reviewed the files and confirmed that the lender actually owns the mortgage note.

"Now I see the affidavit in my case was signed by the guy who was all over the news -- the so-called Robo-signer," said Fitzgerald, who has hired an attorney in a bid to recover his home.

Fitzgerald was referring to Jeffrey Stephan, a foreclosure specialist with GMAC Mortgage, one of the nation's largest and most troubled home lenders. In a sworn deposition, Stephan has said that he signed about 10,000 foreclosure affidavits per month without personally verifying the documents associated with the case.

GMAC Mortgage, a unit of Ally Financial Inc., which is majority-owned by the U.S. government, announced this week that it was suspending sales of foreclosed homes and evictions of borrowers who have fallen behind on the mortgages in 23 states. In a statement, the company said the temporary suspensions were intended to give it time to review its procedures.

Foreclosure lawyers said the action could highlight problems with other lenders that may have illegally driven homeowners out of their homes. It also offers a glimpse, they said, into an overloaded foreclosure process in desperate need of change.

"The problem with foreclosures is that we have short-circuited all of the legal processes and safeguards that our courts are supposed to provide," said Matthew Weidner, a real estate lawyer in St. Petersburg. Fla.

"Now, they've started just spitting out tens of thousands of these documents. Lenders are getting real nervous," he said. "The fundamental process, the basics that we use to try and take a consumer's home is flawed."

Gina Proia, an Ally spokeswoman, said in a statement that an "internal review has revealed no evidence of any factual misstatements or inaccuracies" in the legal documents.

The company would not say how many homeowners would be affected by its suspension of evictions and foreclosure sales. It expected the review to be completed in anywhere from a few weeks to the end of the year. Ally said the delay would not affect newly defaulted loans.

Proia said Stephan, who could not be reached for comment, was still employed by the company. She would not say whether he still handled foreclosures.

Since the start of the foreclosure crisis in 2008, it has become common for plaintiffs' lawyers and servicers to assign an employee to sign hundreds of affidavits, even though the signers usually are not familiar with the cases, according to foreclosure lawyers.

In courts around the country, some judges have raised questions about what amounts to a virtual assembly line of foreclosure affidavits in attempts to speed up the arduous process.

"You know what I'd really like to see?" Pinellas County, Fla., Circuit Judge Anthony Rondolino told plaintiffs' lawyers during a foreclosure hearing in April. "I'd like to see in one of these cases where a defense lawyer cross-examines, takes a deposition of these people [so] we can see whether they ought to be charged with perjury for all of these affidavits."

At that hearing, the judge vacated a summary judgment he granted in January in favor of GMAC Mortgage. Rondolino reconsidered his decision after a defense lawyer requested a rehearing to challenge GMAC's affidavit, which did not include any sworn or certified documents.

Chris Immel, a lawyer with Florida-based Ice Legal, who represents homeowners who claim Ally unfairly foreclosed on them, said he believes the company is not alone in the questionable practices.

He said the problem is exacerbated by the large number of homeowners who don't challenge their foreclosures or who represent themselves in court.

"There's been a system that has been put in place by the various servicing companies to basically push these cases along as quickly as possible, so they're signing documents without really reviewing them," he said. "Ally just got caught."

It was in a deposition before Immel last December that Stephan stated that when he put his signature on case files, he did not know what information the file contained other than the borrower's name, that he did not inspect the exhibits he was supposed to and that the notary who supposedly witnessed his signings was not in the room.

"When they're signing these affidavits en masse they have zero responsibility, zero knowledge, zero accountability," Weidner said. "The real issue is that we have allowed our court system and the entire process to become desecrated. It is a continued manifestation of the faulty practices that got us into this mess and brought the country to the brink of financial Armageddon."

Florida Attorney General Bill McCollum has launched an investigation of three law firms that represent loan servicers in foreclosures and allegedly submitted fraudulent documents to the courts, McCollum said in a statement last month. The firms handled about 80 percent of foreclosure cases in the state.

"The Attorney General's economic crimes division is investigating whether improper documentation may have been created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners," McCollum said.

Fitzgerald said he and his 65-year-old wife were forced to leave their home, without most of their belongings, in early April.

"The sheriffs came like German storm troopers," he said.

Since then, they have lived in a studio at an Orlando hotel. He has consulted Immel about trying to get the house back.

"I have hope this can be turned around," he said.