Naked Capitalism: GMAC Ordered to Stop All Foreclosures in California

25 Sep

Well, Jerry Brown finally takes action!?  Who knew…

False Affidavits: In Court and Out of the Courts – Why GMAC chooses to stop foreclosures in Judicial States – seems we are not the only ones figuring tht they only make this distinction because in Judicial States they have to present their evidence in court – hmmm. That’s what we said…

GMAC Ordered to Stop All Foreclosures in California

from naked capitalism by Yves Smith

Per the Sacremento Bee, hat tip Foghorn Leghorn and Brian:

California officials today demanded that Ally Financial Inc. stop foreclosing on homes in the state, citing reports indicating the big mortgage lender is violating the law.

The cease-and-desist letter, issued by Attorney General Jerry Brown, came as officials in several other states began investigating Ally’s operations…

According to Brown, California law forbids a lender from issuing a notice of default – the first step toward foreclosure – unless it can show it has tried to contact the borrower. The law covers mortgages originated between 2003 and 2007.

Attorneys general in Texas, Iowa, Illinois and Florida are also investigating.

So it appears the Brown argument is at least that the robo signers are the ones affirming that the banks tried contacting the borrower, when they are in no position, legally or practically, to do so. But this potentially opens a much bigger can of worms, that the robo signers may have been providing cover for the failure to make the required effort.

Update 10:00 PM. Hoisted from comments per reader dladow:

California was not one of the 23 states in which Ally halted foreclosures, presumably because it is a non-judicial foreclosure state. Apparently Jerry Brown halted the foreclosures based on the requirement under Civil Code 2923.5 that prior to serving a notice of default, the first step in the foreclosure process, the trustee must file a declaration (affidavit) that it has contacted the borrower “in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure.” In light of the revelations about filing false affidavits in courts in other states, it will be interesting to see what additional evidence Ally will have to produce to substantiate compliance. The statute seems to require actual contact and not just an attempt to contact. Otherwise the notice of default is invalid, and the trustee has to start over. Interesting to ponder the effect, if any, on already executed foreclosures.

As dladow added later, California provides for a very clear process for trying to reach the borrower if contact proves difficult. It requires some organizational discipline, but given that that seems to have been notably absent, there is a real possibility that false affidavits were used to cover for failure to comply,

A further wrinkle: The attempt that GMAC is trying to make, as in differentiating between judicial and non-judicial states, appears very questionable. In both cases, they are producing bogus affidavits to pursue foreclosures. However, in the judicial states, they must present them to the court in the course of every foreclosure. In non-judicial states, they are presented to the court only if a borrower fights the closing.

So their parsing appears to be based on their view that this is only worth addressing in states where they can be found to be pervasively perpetrating a fraud on the courts, as opposed to only some of the time.


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