Foreclosure Freeze nationwide?

September of 2010 could be the beginning of a foreclosure halt by the Top 7 banks across the United States. Ally Financial, a unit of GMAC has already agreed to halt foreclosures in 23 states. JP Morgan Chase has reportedly halted 56,000 foreclosures as well.

This foreclosure halt was instituted after it was discovered that Ally employees were signing affidavits on foreclosures cases yet having no personal knowledge of the information contained in the files. The Court also heard testimony from a Ally Financial/GMAC employee that they were not signing the affidavits in front of a notary, as required by law. These types of employees have been labeled “robo-signers”.

In light of the evidence in these cases, John Walsh, acting director of the Office of the comptroller of the currency has directed a review to be done of Ally Financial/GMAC, JP Morgan Chase, Wells Fargo, US Bank, Citibank, HBSC and Bank of America.

Industry experts believe that more banks are likely to follow the example of Ally Financial/GMAC and JP Morgan Chase. However it took the national media uncovering leaked information before anyone involved would even comment on it.

Surprisingly enough, this is not GMAC’s first round with its employees submitting falsified information to a court of law. In 2006 Florida circuit Court Judge, Bernard Nachman, sanctioned GMAC because it had found that they “submitted false testimony to the court in the form of affidavits of indebtedness”. Judge Nachman ordered GMAC to confirm to the court that their internal policies had changed.

After being sanctioned in 2006, the Legal Department of GMAC issued a memo to its employees “not to sign verifications of court pleading documents unless you have independently reviewed and checked the facts”. However the same executive that was sanctioned in 2006 went on to supervise a department of 13 people, one of whom confessed that his department was doing just that. This department has been, according to Jeffrey Stephan, signing foreclosure documents at the rate of approximately 10,000 per month, none of which he told the court were properly reviewed.

The foreclosures that have been placed on hold are currently in the 23 states that have a judicial foreclosure process. However, Attorney General of California Jerry Brown has ordered a cease and desist letter to Ally Financial/GMAC. California is not currently a judicial foreclosure state, yet according to Brown, California law forbids a lender from issuing a notice of default-the first step in the California foreclosure process- unless it can show it has tried to contact the borrower. This law governs mortgages that were originated between 2003 and 2007.

If you are unsure of the foreclosure laws of your state or are facing foreclosure with Ally Financial/GMAC or JP Morgan Chase, industry experts say you should contact an attorney immediately to understand your rights as a consumer.

Written by Jamie Brace, Staff at US Loan Auditors, the premier California-based forensic real estate loan auditing firm serving victims of predatory mortgage lending abuse.