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.
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.
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