4. is the problem limited to GMAC Mortgage? GMAC Mortgage and other banks may hope to sell the story line that its problem is limited to a lone “rogue servicing officer.” Unfortunately, the servicing officer in question indicated in his testimony that he prepared 10,000 or more affidavits per month, so it strains credulity to think that GMAC management was ignorant of his actions.
So far, mainstream press accounts have been limited to issues at GMAC Mortgage, which is a large servicer, but only a modest portion of the overall market. However, it is possible, that the root of the problem lies not with the servicer, but started with the sellers and the trustees in the mortgage securitization process. If the mortgage loans were conveyed in the securitization process in a way that clouded the title, the problem could be widespread, and borrower attorneys can provide a large body of evidence from cases in many states. Although GMAC appears to be the party ultimately responsible, it also works very closely with the foreclosure outsourcing firm, Loan Processing Services, so they or the foreclosure mills they retain may also bear some responsibility.
5. Are foreclosure problems limited to this sort of technical issue? The conveyance of real estate has a long legal history and is governed by state law. Numerous checks and balances are written into both the sale and the foreclosure process to ensure that the transfers are conducted properly and disputes over ownership are minimized. Part of the appeal of mortgage loans as an asset, back before the financial crisis, was that the procedures and laws for mortgage loans was well establishes, so owners or investors could take comfort that their interests were well protected.
Unfortunately, there is increasing evidence that the mortgage loan industry went off the rails during the bubble years. And if the issues underlying GMAC Mortgage action are a result of bad origination and closing procedures, rather than poor servicing, the problems may be much larger than inaccurate affidavits.
We will be watching on the GMAC Mortgage situation and related issues. GMAC Mortgage’s remarks today did not clarify matters, and their failure to come clean, and the obvious conflict between the claims in their press release and their own memo suggests other shoes have yet to drop. If these issues extend beyond GMAC Mortgage and inaccurate affidavits, the mortgage industry will be facing some deep and difficult problems.
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