Affidavit problem stalls GMAC foreclosures

Affidavit problem stalls GMAC foreclosures

Thousands of home foreclosure cases in Florida and nationwide might have been stalled by the sworn testimony of one GMAC Mortgage employee.
Jeffrey Stephan, a GMAC foreclosure team leader, admitted under oath last December that he signed tens of thousands of affidavits verifying mortgage note ownership and amounts, even though he never saw original documents in those cases, according to court documents.
Stephan and GMAC have described the process of signing affidavits as a normal and expected routine that the company engaged in.
On Monday, several national media outlets incorrectly reported that GMAC had announced a blanket moratorium on residential foreclosures. The company denied that in a statement.
In fact, about three months ago, GMAC, now a part of Ally Bank, halted evictions and final sales in foreclosure cases in 23 states, including Florida.
The company acknowledged in a statement Monday that the evictions – not foreclosures – were halted because of a problem with affidavits.
GMAC Mortgage spokesman James Olecki acknowledged the following problems with the affidavits:

• May have been executed without direct personal knowledge of all of the information stated in the affidavit.
• In a number of cases, the affidavit was not signed in the physical presence of a notary public.

Olecki, who did not specifically identify Stephan as the person signing affidavits, said whoever signed them relied on the personal knowledge and information of other GMAC Mortgage personnel, and was known to the notary.
Olecki also said the facts of the affidavits are correct, and that GMAC would be working to clear up any problems.
Stephan testified in a deposition that he signed 10,000 affidavits a month.
In an e-mailed response to a request for comment, GMAC said Stephan still works for the company, but he was not available for comment. Efforts to reach his attorney, Alejandra Arroyave of Coral Gables, were not immediately successful.
The problem with affidavits may be a factor in state investigations of foreclosure law firms by Attorney General Bill McCollum.
One of the firms under investigation, Tampa-based Florida Default Law Group, recently told a Palm Beach County circuit judge that information on an affidavit it filed in a foreclosure case may not have been verified.
Florida Default attorney Jeff Gano said in a Sept. 7 notice that it would be filing a new affidavit in the Palm Beach County case, which was filed by another lender, Bank of New York Mellon Trust as successor to JPMorgan Chase Bank.
Meanwhile, U.S. Rep. Alan Grayson, D-Orlando, has called on the Florida Supreme Court to suspend all foreclosure cases filed by the top four foreclosure firms in the state until the attorney general’s investigation is complete.
On Tuesday, Grayson released a letter he wrote to Chief Justice Charles Canady, in which he mentioned a Jacksonville foreclosure case where one of the firms under investigation, Shapiro & Fishman, was found to have committed fraud on the court by filing false documents about who owned a mortgage note.
“Taking someone’s home should not be done lightly,” Grayson wrote. “And it should certainly be done in accordance with the law.”

GMAC Confidential Letter to Preferred Agents

GMAC Confidential Letter to Preferred Agents

Mozilo Settles Countrywide Case With SEC

10/15/10

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Former Countrywide Financial Corp. Chief Angelo Mozilo settled charges today that he duped the home loan company's investors while reaping a personal windfall, ending one of the biggest enforcement actions to come from the financial collapse.
Mozilo reached a last-minute deal with the Securities and Exchange Commission (SEC) before the start of his trial on civil fraud charges on Tuesday.
The settlement with Mozilo and two other Countrywide executives was announced in Los Angeles federal court. The defendants, accused of hiding risks about Countrywide's loan portfolio as the real estate market soured, were not present.
Countrywide, once a titan in the mortgage industry, is now part of Bank of America Corp.
Mozilo will pay a $22.5 million civil penalty, plus $45 million in disgorgement, according to U.S. District Court Judge John Walter. The disgorgement relates to proceeds of Mozilo's sales of Countrywide stock. Mozilo was once one of the best-paid corporate executives in the country.
"In my view the proposed settlement is very reasonable in light of the significant hurdles that both sides would have faced in proving their case at trial," the judge said.
All three defendants settled without admitting or denying any wrongdoing.
David Sambol, former Countrywide president, also agreed to settle the case, the judge said, as did former Chief Financial Officer Eric Sieracki.
The SEC brought the fraud case in June 2009. The former executives were accused of failing to disclose the true state of Countrywide's deteriorating mortgage portfolio. Regulators also contend Mozilo made nearly $140 million by dumping Countrywide stock before the truth emerged.
Bank of America bought Countrywide in 2008 for $2.5 billion, less than 10 percent of what the company was worth in early 2007. Ten months later, Bank of America scrapped the Countrywide name.
The SEC had no immediate comment on the settlement. (Reuters)

Seven Mistakes To Avoid Prior to Filing Bankruptcy

Seven Mistakes To Avoid Prior to Filing Bankruptcy


 In order for your bankruptcy case to run smoothly through the process, you need to avoid these seven mistakes people make before they file their bankruptcy case. 

1. Do Not Run Up Your Credit Cards:  Once you've decided to file for bankruptcy because any debt in excess of $500.00 incurred within 90 days of filing for bankruptcy are presumed to be non-dischargeable and you may end up holding the bag on this.  Also, cash advances of more that $750.00 made within 70 days of filing are presumed to be non-dishcargeable and may be found due and owing.
2. Don't Repay Any Family Members:  You cannot repay your family members any better than you would any other creditor.  In fact, the bankruptcy trustee can reclaim any amount you paid to a family member within one (1) year of filing bankruptcy.
3. Do Not, I Repeat, DO NOT Cash Out Your Retirement Accounts:  This is one of the biggest financial mistakes you can make EVER.  Retirement accounts are generally exempt from the trustee taking when you file for bankruptcy.  This means that you can usually eliminate your debts and keep whatever you have in an ERISA qualified account. 
4. Do Not Transfer Any Property Out of Your Name:  You have a duty to disclose all  of your assets to the trustee and your estate essentially belongs to the trustee once you file for bankruptcy.  The trustee can, and in most cases, will undo any such transfers made within two (2) years prior to filing for bankruptcy.
5. Do Not Try to Reduce Your Home's Equity:  Right now this should not be an issue here in California since most of us have no equity in our homes.  Just keep in mind that there is a homestead exemption and in most cases, you can keep your home and the equity, and still file for bankruptcy.
6. Do Not Fail to Appear At Court Proceedings:  Until your bankruptcy case is filed with the court, any civil proceedings, or collections case against you will continue and you MUST appear.  Also, you MUST appear at your 341(a) Meeting of Creditors in your bankruptcy case and all other appearances as instructed by your lawyer.
7. You Must Tell Your Lawyer The Truth:  Your lawyer can only provide advice based upon the information you provide.  If you fail to tell your lawyer about your assets you could lose them, your bankruptcy case could be dismissed, you could be fined, and you could end up in prison for bankruptcy fraud.

So, if you've decided to file for bankruptcy, follow these golden rules.  Don't risk your financial fresh start because you deserve a life free from debts that you cannot afford to pay. 

Forgetting to Include a Legal Description in the Mortgage Not Fatal in the Sixth Circuit

Forgetting to Include a Legal Description in the Mortgage Not Fatal in the Sixth Circuit

So does it really make a difference if someone (the closing attorney for your mortgage) messes up and forgets to attach the exact legal description to a mortgage which then gets recorded?  It may depend on how specific the mortgage is in describing the parcel of real property.
Now you would think this was an easy question, but apparently not.  We needed a Sixth Circuit opinion recently issued (and recommended for full publication) to tell us that as long as the property is identified with sufficient precision that you could actually locate it  in real life, the mortgage works as a valid lien on the property.  Thanks to Amy Bower (who represented the winner),  my Managing Partner here in the Columbus office of Plunkett Cooney for sharing this decision with me.
In Argent Mortgage Company, LLC v. Drown, Case No. 08-4508 (6th Cir. August 25, 2009), the Court addressed the question of

whether a recorded mortgage that contains the street address of residential property - but not the legal description - is sufficient to preclude the setting aside of an other-wise mortgage in bankruptcy court.

Judge Hoffman  originally ruled that the Chapter 7 Trustee could avoid the mortgage pursuant to section544(a)(3) of the Bankruptcy Code, relying heavily upon Stubbins v. American General Financial Services, Inc. (In re Easter), 367 B.R. 608 (Bankr. S.D.Ohio 2007), a decision by Judge Preston.  and caselaw discussed in that opinion, Judge Hoffman reasoned:

Under the circumstances of this case, the Court agrees with the Trustee that something more than the street address and permanent parcel number is necessary to provide constructive notice of the Mortgage to a hypothetical good-faith purchaser for value.  This is so because even if a third party had record notice of the existence of this Mortgage, neither the parcel number nor the street address , nor both together, would lead that third party to discover precisely what property is covered by the Mortgage.  Both a street address and a permanent parcel number may refer to a geographic area that contains more or less than what the morgagor intended to encumber.

The district court reversed and the Sixth Circuit upheld the district court's decision.  I agree with the Sixth Circuit in this situation when it notes

Mortgaging part rather than all of a single-dwelling residential subdivision property  is far enough outside the ordinary course of business that a reasonable prospective purchaser should assume that an ambiguous mortgage likely intended to encompass the entire residential lot at issue  

Should a Christian Declare Bankruptcy?

Series on Christian Bankruptcy

Should a Christian Declare Bankruptcy?: The Ideal Level

Many Christians are interested in the relationship between Christianity and bankruptcy.  The question of Christians and bankruptcy can be discussed on two levels.  I’ll call the first the “ideal level” and the second the “sin stained” level.


On the one hand, the Bible does not deal specifically with the word bankruptcy.  On the other hand, the Bible does address borrowing and the importance of vows.  A vow is simply a promise.  In our society, every dollar we borrow we sign a legal document.  That document is our written vow to repay the debt.  Here are a few of many such verses:

The wicked borrow and do not repay, but the righteous give generously. (Psalm 37:21 NIV)

When you make a vow to God, do not delay in fulfilling it. He has no pleasure in fools; fulfill your vow. It is better not to vow than to make a vow and not fulfill it. (Ecclesiastes 5:4-5 NIV)

And do not swear by your head, for you cannot make even one hair white or black. Simply let your ‘Yes’ be ‘Yes,’ and your ‘No,’ ‘No’; anything beyond this comes from the evil one. (Matthew 5:36-37 NIV)

On the theoretical level if we were to invert the question –is it good for a Christian to borrow and not repay, the obvious answer is no. Borrowing and not repaying hinders a positive Christian witness.  It hinders trust and credibility.  It violates the golden rule.  But, that does not mean these verses are the end of a discussion.  They are instead the beginning of our discussion.

Should A Christian Declare Bankruptcy: The Sin Stained Level

I believe God has always been a God who presents the ideals to humanity while recognizing the reality of our sin stained world.  Take, for example, the issue of divorce (for illustrative purposes, not to start a huge theological debate).  The Pharisees ask Jesus if it is “lawful to divorce” (Mt. 19:3).  Jesus says divorce is not lawful – on the ideal level.  You will not find Bible verses that discuss divorce as a good thing (Mt. 19:4-6).  Nevertheless, because of the hardness of peoples’ hearts, there is a certificate of divorce (Mt. 19:8).  The discussion has now moved from ideal to the sin stained level.  Not divorcing is the ideal, yet a certificate of divorce exists because God recognizes a sin stained level where the ideal is no longer possible.  In those cases, the individual must then seek the best available alternative.
The reality is that manyChristians are in positions where they simply do not have the money available to repay loans. Many Christians are in situations where they have creditors who are unwilling to work with them.  So my question, on the sin stained level, is what are they supposed to do?  They cannot make money appear.  They cannot make debt disappear. As a result, bankruptcy may be their only option.  In some cases bankruptcy might just be the next best course of action.
Notice specifically this is not a discussion of declaring bankruptcy out of convenience or because it is an ideal financial decision.  In those cases I believe it would be a violation of Biblical principles to declare bankruptcy.  This discussion, however, does apply to those who do not have an actual means to settle their debt.
If bankruptcy is necessary, it is important that Christians have boundaries in place to help lead them through the process.  In next week’s post we will discuss guidelines to consider when filing bankruptcy.

Conclusion

Often the discussion of bankruptcy is a ‘reactive’ discussion.  A person is in debt, does not have the money necessary, and is not receiving any mercy from a lender.  However, it would be better to devote our energy to discussing the question should a Christian make decisions that might put them in a place where it will be necessary for them to declare bankruptcy? The answer to this question is no.  This is a ‘proactive’ discussion where we can help people avoid getting into a place where the ideal is no longer an option for them.  Bankruptcy is not good.  People often are not blessed by the processes.  Thus, the next important question is what can Christians and churches be doing to help their members and community avoid situations of bankruptcy?

8 Things To Consider Before Walking Away From Your Mortgage

Last week I received an email from a desperate couple. Here's the edited version of their note:
"My wife and I have been struggling, morally, with what to do. We have two interest-only, adjustable-rate mortgages with two different lenders coming due in May of 2011. I currently can handle paying all my bills–but just barely, with nothing left over for replenishing of the emergency fund, or even my kids' college savings.
In one year, when those adjustable rate mortgages adjust, it's a different story. The home is now worth about 70% of the loan values. We do not want to stay in the home and have been trying to be proactive about doing something before the rates adjust. My lenders both said that if I do a short sale they would definitely make me sign a promissory note (for the deficiency). That defeats our purpose, so it is not an option for us. Bankruptcy attorneys have told me I make too much money to file for Chapter 7. I am currently employed. Last June I lost my previous job, and squandered our savings to stay above water with bills and the mortgages. Hindsight is 20/20 and at the time I should have filed for Chapter 7.
So, I am considering just letting the home go to foreclosure, saving my money, paying off other smaller debts (such as credit cards, and car loan), but am hesitant. I want/need to do the right thing fiscally for my family, but am wavering on the fence as to just take the plunge or not in a strategic foreclosure.
What should we do?"
These people are far from alone. Millions of middle-class Americans today are in a similar situation. They are struggling with their mortgage payments, and cannot sell because they are a long way underwater, owing more on their home than it is worth. They have wiped out their savings trying to keep up. One worker in six is either unemployed or underemployed, and there is a tsunami of rate resets coming in the next two years.
No one forced them to borrow –but no one forced the banks to lend either. More important right now is how they get out of it. I took this conundrum to two experienced bankruptcy attorneys–Richard Nemeth in Cleveland and Jeffrey Tromberg in Ft. Lauderdale, Fla.–for their advice. Here are some thoughts they offered.
1. Put those suitcases down! Stop and take a deep breath. Sure, you could just walk away from the home today. There is a decent chance the banks won't come after you for the shortfall either. And, as I've written before, the issue is not really a moral one. But you should first make sure you explore all your options to make sure you do it right.
2. Find out if you are eligible for help from the federal government. If your lender won't modify the loan or agree to wipe out the deficiency through a short sale, Uncle Sam may still help you. The Making Home Affordable program was signed into law by President Obama last year. It hasn't achieved as much as some may have hoped, but it has still helped some homeowners. The program offers mortgage modification and refinancing for some homeowners who are struggling, but there are conditions. The Department of Housing & Urban Development also offers help and advice on avoiding foreclosure: Details can be found here.
3. Get another legal opinion. You say you've spoken to bankruptcy attorneys, but were they specialists? Bankruptcy law in the U.S. like something out of Charles Dickens, even though it was just rewritten a few years ago. It's convoluted, self-contradictory, and complex. The laws vary from state to state, and case law is changing almost weekly. It's just five years since Congress passed sweeping legal changes, and many of the new rules are only getting road tested now. You may get different answers from different experts. Even those who pushed for the law, such as the lending industry, have been surprised at how some of it has worked out. It's worth making sure your counsel knows the minutiae. The National Association of Consumer Bankruptcy Attorneys (NACBA.org) should be able to help you find a local specialist.

Related

• An Odd Way to Track Mortgage Modifications
• BofA Breaks Into Another House
• ROI: When It's OK to Walk Away

4. Double-check to see if you can still squeeze under the bar for a Chapter 7 bankruptcy. Chapter 7 is probably the simplest way to clear your debts, walk away and start again. I know you say you've been told that you earn too much to qualify. The 2005 law made qualification much tougher. But the new means test is actually far less restrictive than many people–including many attorneys–think. It allows some pretty generous exclusions from your gross income. You are, for example, allowed to deduct some pension and 401(k) contributions. You are also allowed to deduct charitable donations up to 15% of your gross income, though you have to demonstrate some history of these contributions. Make sure your counsel is experienced at bankruptcy filings and has fully explored how you might be able to make these work for you.
5. Realize that even if you can't file now, that may change. The means test also excludes mortgage payments from your income. So even if you earn too much to file for Chapter 7 today you may do so when the mortgage rates reset. Mr. Nemeth says that the bankruptcy laws contain some peculiar loopholes you need to know about. For example, they may actually reward you for falling behind on your mortgage payments. That's because your mortgage arrears will help reduce your effective income for the purposes of the means test–even if you plan to walk away from the home. Crazy? Yes. But blame the lenders. This is the law they, um, lobbied for.
6. Understand how a Chapter 13 might help you after all. Chapter 13 is "bankruptcy lite," for those whose income is too high to qualify for a Chapter 7. It involves a debt repayment plan (it's something like the Chapter 11 bankruptcy process used by corporations, though not as generous). In Chapter 13, the courts work out how much of your unsecured debts you can reasonably repay and set up a schedule to repay it.
Chapter 13 will not reduce the value of your primary mortgage. But make sure your counsel understands a little-known gap in the law that can help distressed homeowners who either have two mortgages, or one mortgage and a home equity line on top. If the property value has fallen so far that the primary mortgage is now under water, the courts can rule that the second mortgage is now an unsecured loan. And that, miraculously, means they can modify it. An example: You take out a $200,000 first mortgage and $50,000 second mortgage to buy a home for $250,000. The home then falls in value to $180,000. As that's not even enough to cover the first mortgage completely, the second mortgage now has no collateral against it at all. The court, in most jurisdictions, can now modify that second mortgage the way they could other unsecured debt, such as a credit card payment.That could include reducing it to zero.


7. Keep contributing to your 401(k), IRA and 529 plans. It's very easy in a crisis to stop thinking about the distant future. After all, you've got your hands full dealing with today. But this is a dangerous reaction. Why? Because money invested in a qualified retirement plan, and in 529 college savings plans under some circumstances, enjoy substantial legal privilege. They can be sheltered from creditors in bankruptcy. And the contributions may actually help you qualify for bankruptcy--as mentioned above. But the earlier you start making these contributions, and the longer you have been making them, the more respect the courts are likely to give them. Mr. Tromberg's advice: "If both parents are working, I would contact the HR or 401(k) coordinator at work and say 'I'd like to max out my contributions today.'"
8. If all else fails? There are not always easy answers. If there really is no way to make use of Chapter 7 or Chapter 13, you may indeed decide just to walk away from your mortgage and let the chips fall where they may. You have already made valiant efforts to keep up your payments. You are absolutely right to put your family's finances first. But do explore the implications fully. Specialist knowledge can help. For example in some states the lenders have a very limited time to file legal papers for the arrears. And in many cases they are so swamped that they aren't even bothering. And before walking you should also at least consider ceasing payments on your mortgage but staying in the home. Many mortgage lenders have made this crisis worse by refusing to sit down with borrowers to strike a deal. Alas, they may react better to a stopped check than a polite phone call.