UPDATE 1-Ohio asks courts to review GMAC foreclosures
* Ohio asks courts to look at GMAC foreclosures
* Several states inquiring into GMAC
* GMAC confident no inappropriate foreclosures took place (New throughout)
NEW YORK, Sept 28 (Reuters) - Fallout over GMAC Mortgage's foreclosure practices deepened on Tuesday as Ohio's top law enforcement official asked courts in that state to review all foreclosure cases involving the Ally Financial Inc unit.
Richard Cordray, the state's attorney general, said he made his request after GMAC last week acknowledged that some employees were submitting affidavits in foreclosure proceedings without personally verifying the documents' contents.
This has raised doubt over GMAC's foreclosure process, including whether some borrowers lost their homes without good reason, exacerbating the nation's housing crisis.
It has also raised the specter that procedural shortfalls might be an industrywide problem, and not limited to GMAC.
Cordray said court oversight is needed to address the concerns of borrowers facing "absolutely desperate situations," and protect the integrity of the foreclosure process.
Ally said this month it has suspended evictions and post-foreclosure proceedings in 23 U.S. states, though it has not halted foreclosure proceedings.
"We're exercising an abundance of caution to preserve the integrity of the process," Ally spokeswoman Gina Proia said. "We're confident that the processing errors did not result in any inappropriate foreclosures."
Investigators in several states including California, Colorado, Connecticut and Illinois are investigating GMAC foreclosure practices or have asked the company to halt or defend its foreclosures.
John Suthers, Colorado's attorney general, in a Sept. 27 letter to Ally's general counsel asked for an explanation of all of GMAC's foreclosure practices, "to ensure that fair and accurate representations are made when it pursues foreclosure actions" in that state.
JPMorgan Chase and Co (JPM.N), one of the biggest U.S. lenders, is separately being questioned about its practices by Florida lawyers who said one bank executive authorized a foreclosure without personally reviewing the underlying details. A bank spokesman declined to comment. [ID:nN27263592]
Proia says Ally hopes to address the "vast majority" of cases involving improperly signed affidavits by year end. (Reporting by Jonathan Stempel in New York; Additional reporting by Al Yoon; Editing by Kenneth Barry, Bernard Orr)
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It is also hiding something else, which is that the United States has forgiven home mortgage indebtedness. Look:
1. ownership stake in banks (creating Fifth Amendment Due Process rights to what is in FACT–not the arbitrary 31%–minimization of the risk of housing loss(on this prong, please see online the Huxtable v. Geithner Order (not the Order to Dismiss–sounds like a settlement was reached since Huxtable filed no opposition). The reasoning of Huxtable is sound and is pretty generally accepted now. There IS a Fifth Amendment Due Process right based on U.S. ownership of banks, and this Due Process right is a right to a modification based on what is in FACT the minimization of risk of default–this means that the 31% is simply the Government’s assertion on this point–it is LITIGABLE;
2. contracts with servicers (creating the same rights as above, but on a third party beneficiary theory–see Marques v. Wells Fargo–online). The reasoning of Judge Lorenz is also sound and is simply another basis for claiming a factual minimization of the risk of default, rather than simply accepting the Government’s 31%. Again, the 31% is going to be litigated. People have to get used to that–it’s not off limits anymore;
3. mortgage principal reduction through HAMP;
4. adjustments to gross income for principal reduction through HAMP; and
5. loss of economic incentive to foreclose (this is Reggie Middleton’s analysis on his blog). The Middleton analysis is new (it’s at www.boombustblog.com, the September 23 story on housing prices). The return/chargeoff is rapidly hitting 0.
Litigants in HAMP will certainly have the right to civil discovery as to what the United States has concluded with respect to the economics of foreclosure.
It will probably turn out to be just what the facts show: that the policy is in FACT to minimize the risk of default because there is no economic incentive to foreclose.
Of course this seems impossible, unacceptable, blah blah blah. But if the economic facts bear it out, then the economic facts bear it out and you just have to wrap your head around it. What will happen next/is happening now:
1. litigants will sue to quiet title (among other causes of action such as fraud, conspiracy, Civil Rights violations, etc., naming Tiny Tim, the IRS commissioner and the United States, among others); and
2. the U.S. is scrambling right now to decide what to do if people who have a gazillion dollars and are sitting in a house which is soaring in value, nevertheless decide to simply stop paying on their mortgages.
Of course, the first instinct of Uncle Sam will be some sort of coercion. When that fails in court, the next gambit will be to try to provide some incentive to people to keep paying those damned mortgages. Who knows how this will end?
In any event, it’s Reggie Middleton’s analysis which broke the back of this. Indeed, I’m sure his analysis was already made in the dark of night at the Treasury Department.
That’s been the entire tendency of this mortgage mess: to separate out what is in FACT the policy of the U.S., as opposed to what the U.S. SAYS its policy is. If you believe the latter, you don’t get your day in court. But if you assert the facts in court, then your house is free.
As this unrolls, it will sink the dollar. This will entirely change rights in housing in the United States. Among other things, it means that Lindsey v. Normet minimum scrutiny for housing is out the window, because the United States’ policy is a higher level of scrutiny for housing.
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