Monday, September 20, 2010

Something Fishy at GMAC

Reprinted from Zero Hedge

Zero Hedge has obtained the GMAC Letter referred to earlier by Bloomberg, and contrary to subsequent reports by the bailed out lender that this is merely a procedural adjustment, something does not add up.

To wit, note statements such as:

Do not proceed with evictions, cash for keys transactions, or lockouts. All files should be placed on hold, regardless of occupant type.
Do not proceed with REO sale closings. GMAC Mortgage will communicate instructions to the assigned agent regarding the management of the properties in Pending status. If the contract has already been executed by both parties, the Asset Manager will request an amendment to extend the closing date by 30 days or as otherwise designated by the Asset Manager. Please provide appropriate notice to the REO purchaser that, pursuant to Section 1 of the GMAC Mortgage Addendum to Standard Purchase Contract, GMAC Mortgage is exercising its sole discretion to extend the Expiration Date of the Agreement by 30 days at this time. If the REO purchaser wishes to cancel the contract, GMAC Mortgage will terminate the Agreement and return the earnest money deposit
And mostly: "There could be asset level exceptions and you will receive direct communication from GMAC on the handling of those exceptions."

In other words, the new revision is the de facto new standard, and not the exception to the rule, as GMAC's subsequent refutation would like to make it seem.

Why the sudden urgency? And why these 23 states in particular?

Once again, we welcome the ABA's chiming in on this development which could do more to hurt the banking profession's already abysmal reputation with the Main Street community than even the S&P hitting its fair value somewhere south of 400.

GMAC Mortgage Letter


  1. The Janna Herron Associated Press article entitled GMAC Stops Some Evictions, Foreclosed Home Sales relates: In a deposition taken in December, GMAC employee Jeffrey Stephan said he signed 10,000 affidavits or similar documents a month without personally verifying who the mortgage holder was. That means many foreclosures could have taken place based on false documentation. Stephan could not be located for comment.

    "That's hundreds of thousands of cases," said Ice Legal PA attorney Christopher Immel who took the deposition. "And there are other people at other places who sign these kinds of documents as well."

    GMAC did not address how many homeowners would be affected by its suspension of evictions and foreclosure sales. It expects the issues to be resolved within a few weeks or, at latest, by year-end. The company didn't respond to questions beyond its statement.

    The issue of documenting who holds the mortgage is not unique to GMAC. Judges and lawyers nationwide are taking a second look at foreclosure affidavits. Many mortgages have been sliced up and sold to many investors as securities and that makes it harder to determine who is the ultimate mortgage holder.

    In August, a judge in Duval County, Fla., ruled that JPMorgan Chase could not foreclose upon two homeowners because Fannie Mae carried the mortgage on its books and JPMorgan Chase only serviced the loan. JPMorgan Chase had identified itself as the owner of the loan. Similar cases across the country are pending."

    I conclude that GMAC has stopped foreclosing because the mortgage was securitized by Wall Street, that is it was bundled and resold.

    And then that paperwork was probably divided and sold.

    So the legal issue arises as to who actually owns the mortgage and can one produce paperwork to document that mortgage ownership and thus be able to proceed on foreclosure.

    I'm not at all sympathetic to Wall Street Bankers. Rather I'm sympathetic to the "underdog".

    Is it right for the person living in the home to be foreclosed on, if the person taking action can't produce legal ownership?

    So we have more of a situation where people are living payment free in houses.

    I ask ... Will a Financial And Credit Regulator Arise As Credit Runs Dry?

    I believe that soon, out of a liquidity evaporation and a liquidity crisis, stemming from a fast fall in bond and/or stock values, that here in the US, a Financial Regulator will be announced who will oversee lending and credit, as well as money market and brokerage accounts.

    This person will be what I call a credit boss or credit seignior who funds economic operations with an emphasis on seeing that the strategic needs of the country are met and that monies for food stamps keeps flowing. I believe the government will become the first, last and only provider of liquidity and money.

    I believe that here in the US, the Financial Regulator will exercise Discretionary Governance, and announce a Home Leasing/Renting Program administered by the banks on their REO properties and those of Freddie Mac, Fannie Mae and the US Federal Reserve. Mortgage lending and securitization of loans will cease, and leasing of homes will be a public private partnership cooperative endeavor. Companies that have created and serviced mortgage-backed securities, such as Anworth Mortgage Asset Corporation, ANH, and Annaly Capital Management, NLY, will quickly disappear from the economic landscape, as mortgage bond funds such as Goldman Sachs Mortgage Bonds, GSUAX, tumble in value.

    While many write that Ms Warren has been appointed as a lapdog, I believe that Ms. Warren, is more likely to turn out to be the top dog, that is the Seignior, meaning top dog who takes a cut, and be called upon in time of crisis, to assume the role of Financial Regulator overseeing investment, banking, lending, credit, seigniorage and house leasing as her many articles would apparently qualify her for such a role.

  2. It appears Zero Hedge has also uncovered the 'why' when it comes to the 23 states. These are Judicial states, meaning foreclosures are finished IN COURT,\. It REQUIRES the debtor (defendant) to appear in court because the plaintiff, or bank, has to sue. That's the system in these 23 states.

    Guess what? When a JUDGE decides the outcome in a COURT, and not some other drone in part of the government establishment, this means there are SERIOUS CONSEQUENCES if you don't have your ducks in a row and have the paperwork right. And let me tell you, the mortgage industry is rife with stupidity. LOTS OF IT. Judges can send you to jail for fraud. Or give defendants money. Or even forgive the mortgage, in extreme cases. And will always give the lawyers LOTS OF MONEY in class actions.

    Watching the experience of many family members trying to refinance, perform short sales, and trying to get NEW mortgages, these banks are idiots across the board. If they can screw something up THEY WILL. Personally, I think GMAC is the tip of a massive, massive iceberg of gross negligence. GMAC and JPMORGAN won't be the last.