Attorney General Martha Coakley may become the latest to jump into the burgeoning controversy over allegations of assembly-line style foreclosures at major mortgage industry loan servicers.
These are firms that are servicing mortgages originated by other lenders, including pushing forward with foreclosures when homeowners fall behind on their payments.
At issue are revelations that a GMAC Mortgage employee signed off on thousands of foreclosure documents without checking their accuracy. The GMAC middle manager has owned up to signing 10,000 foreclosures a month. That's 500 a day, or one per minute. How reassuring is that?
A spokeswoman for Coakley's office told me yesterday our AG is exploring the issue, but as a practice does not comment on whether a formal investigation has been launched.
I think we can read between the lines here, with attorney's general in Iowa, Illinois and Texas having launched formal investigations.
In fact as I write this, Connecticut Attorney General Richard Blumenthal has become the latest to take on GMAC, intervening on behalf of 2,400 homeowners across that state poised to lose their homes to foreclosure.
OK, if the bank is not breathing down your door, why care? Very simply, with the home buyer tax credit gone, the painful process of letting sales and prices fall until they hit their natural level has begun.
No recovery until we hit bottom. However, if court systems become jammed with challenges to faulty foreclosures, the whole process gets dragged out even longer, as Bloomberg explores in this piece.
Don't get me wrong - homeowners that have been screwed over by lender incompetence should get their day in court. But the rest of the real estate market is likely to pay a heavy toll for the failure of lenders to simply hire enough staff to ensure foreclosures are properly handled.
Now it makes more sense to me how some lenders have even messed up to the point where they have foreclosed on homes whose owners were current on their payments. One of the most bizarre case involved contractors for Bank of America who cleaned out the home of a Pittsburgh woman who was current on her payments, even taking her beloved parrot, Luke. The bank later apologized, but she was forced to drive 60 miles to pick up her traumatized pet.
Nor should anyone think GMAC employees were alone in blindly signing off on thousands of foreclosure documents.
A JP Morgan Chase & Co. executive has acknowledged in a court deposition that she also signed off on thousands of foreclosure documents a month without checking.
GMAC and JP Morgan Chase are part of a big five group of mortgage servicers - handling loans originated by another lender - that control more than 70 percent of this market.
And you and I are paying for these shoddy practices, with the U.S. government owning a 56 percent stake in GMAC Mortgage's parent company, Ally Financial.
How will this all play out here in Massachusetts?
GMAC has since suspended foreclosures in 23 states, but apparently not in Massachusetts and New Hampshire. While those other states require a judge to sign off on foreclosures, the Bay State and our ornery northern neighbor don't.
But Coakley has had a track record of aggressively pursuing cases against shoddy lending practices, winning foreclosure stays from subprime lenders and big settlements as well.
This is likely too big a target to pass up.
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