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Tuesday, September 21, 2010

On the GMAC Foreclosure Stories

by Calculated Risk on 9/21/2010 08:31:00 PM

I was going to ignore this, but I realized Tanta had written some informative and entertaining pieces that will help everyone understand the issues.

First an update from Bloomberg earlier today: Ally Says GMAC Mortgage Mishandled Affidavits on Foreclosures

Ally Financial Inc., whose GMAC Mortgage unit halted evictions in 23 states amid allegations of mishandled affidavits, said its filings contained no false claims about home loans.

The “defect” in affidavits used to support evictions was “technical” and was discovered by the company, Gina Proia, an Ally spokeswoman, said in an e-mailed statement.
The basic facts are:
  • The homeowners had a mortgage.
  • The homeowners are in default.
  • The lender was sloppy and filed inaccurate documents with the court.

    This is great for the lawyers (fighting foreclosure), and costly for the lender, but this is nothing new - except that GMAC must not have been paying attention!

    The best reporting on the GMAC story comes from 2007 (just change the name of the lender) - and you can learn all about affidavits from Tanta's posts:

  • From 2007: Deutsche Bank FC Problems and Revenge of the Nerd

  • And a follow-up in 2007: In Re Foreclosure Cases

  • And in 2008 on Lost Note Affidavit (LNA): Lost Note Affidavits & Skeletons in the Closet

    And what Tanta wrote in 2007 applies to the GMAC stories:
    To summarize: there were dollars on the table encouraging secondary market participants to get real sloppy. ... The big news here is that the true cost of doing business is belatedly showing up. I happen to think that's a more important story than was originally reported.
    Another amazing story is that three years later all these lenders haven't realized how sloppy the original work was!

    Note that all of these stories were for non-GSE lenders and/or loans that were in private label MBS. These guys tried to cut corners everywhere, and they are now paying the price for being sloppy. They deserve to be ridiculed ...