Advocates Charge Foreclosure Process Is Still Broken
STEVE INSKEEP, host:
The weak economy has cost many people their health insurance and also their homes. But the nation's fourth largest home lender, GMAC Mortgage, halted thousands of foreclosures across 23 states this week. GMAC Mortgage is owned by Ally Financial. Critics say the company has been foreclosing on houses without following proper procedures, as NPR's Chris Arnold reports.
CHRIS ARNOLD: It's been several years now since mortgage companies realized that they were facing a huge foreclosure crisis. And housing advocates say that this case with GMAC Mortgage appears to be just the latest evidence that lenders are still making big mistakes.�They say many of these foreclosures are preventable.�But the machinery inside of many mortgage companies keeps chugging away, foreclosing on too many people.
Ms. ANNE REAMER (Consultant): It felt like it was going through a meat grinder process. And that you're just on some machine that you have no ability to stop.�
ARNOLD: Anne Reamer is a self-employed consultant from Northern Virginia. She ran into trouble paying her mortgage when her work slowed down earlier this year. She was in Washington D.C. yesterday at a rally with other homeowners. Reamer's loan was managed by GMAC. Her house has been foreclosed on, though she's still living in it. And she says the process of trying to work with GMAC to avoid foreclosure was frustrating.
Ms. REAMER: They kept saying incomplete paperwork. And you spend upwards of an hour to two hours talking with these people, and then you get to the end and they're like, oh, I'm sorry - gosh, we cant help you.
ARNOLD: There've been plenty of other complaints about crossed wires and sloppy paperwork. And now, GMAC has halted thousands of foreclosure sales across the country. That's after attorneys for homeowners turned up evidence that they say shows that the company was cutting corners in its rush to foreclose on people.
One of those attorneys is Thomas Cox, and he knows how this process is supposed to work.
Mr. THOMAS COX (Attorney): I was actually doing it on the banks' side.
ARNOLD: Now, Cox is on the other side. He's in the state of Maine working with the group Maine Attorneys Saving Homes. Cox says lenders are required to review each homeowner's paperwork and sign documents certifying that a foreclosure is legally justified and that the information is accurate before they can foreclose on somebody. But over the past year and half, Cox began noticing that many of the final foreclosure documents from GMAC were being signed by the same person, an employee named Jeffrey Stefan.
This June, Cox went to Pennsylvania and deposed Stefan.
Mr. COX: The deposition in June turned out to be quite a surprise.
ARNOLD: Cox says that this GMAC employee told him that even though he was supposed to be certifying the accuracy of the documents in a homeowner's file...
Mr. COX: He said he that doesn't look at them. He doesn't bother to go search them out in the computer to look at them.
ARNOLD: And Cox said the sheer volume of foreclosures appeared to make doing a thorough job impossible. Stefan testified he's signing between eight and 10,000 documents a month.
Mr. COX: That works out to be about one a minute. Some of those loan files contain a hundred or more documents.
ARNOLD: Housing advocates call employees like this robo-signers. They say they barely have a chance to glance at all the documents that they're asked to sign.
Mr. COX: Jeffrey Stefan testified that his only duty is to sign papers.
ARNOLD: Stefan was not available for an interview. GMAC's parent company, Ally Financial, which underwrites NPR programming, said that there was a defect in the process with these foreclosure affidavits. But the company says it has fixed this process.
Also, in a statement, GMAC said that an internal company review has revealed, quote, "no evidence of any factual misstatements or inaccuracies." In other words, the company seems to be saying that nobody was wrongfully forced out of their home. Attorneys for the homeowners say they're not convinced of that.
Meanwhile, regulators say they're concerned about these robo-signers at lots of different companies, pushing people too quickly into the foreclosure pipeline.
Mark Pearce is chief deputy banking commissioner in North Carolina.
Mr. MARK PEARCE (Chief Deputy Banking Commissioner, North Carolina): It's really important for the mortgage companies that are doing the foreclosures to make sure that they have the people in place and the processes in place to follow the laws. You know, if they can't do that, they probably shouldn't be taking someone's house.
ARNOLD: Pearce is with a group of regulators tracking foreclosures. He says several years into this crisis, now banks are getting better at handling the millions of homeowners who are behind on their mortgages. But he still thinks there are more people being foreclosed on than there needs to be. Just last month, more Americans lost their homes to foreclosure than in any other month on record.
Chris Arnold, NPR News.
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