50 State Attorneys general are in the final rounds of settlement negotiations over the robo signing fiasco of 2010. The robo signing was brought to light through a deposition taken by Maine attorney Tom Cox against GMAC. According to the NY times, GMAC the mortgage lender was bailed out to the tune of 17.2 billion. A GMAC employee admitted under oath to signing 10,000 affidavits a month which led to foreclosures.
This employee admitted that he had no personal knowledge (a prerequisite to the legality of the document) of what he was signing. The result was all 50 state Attorneys General launched an investigation, along with the Office of Comptroller of Currency into the matter, halting foreclosures in 50 states for nearly a year. The foreclosure rates are set to rise significantly
in 2012 as a result of the pending settlement which may only effect 1 million of some 6 million borrowers whose homes are threatened with either being underwater, being more than 30 days in arrears or both. The banks are relying on a homeowner who must pay a mortgage each month in order to keep the larger institutional investment at the top of the pyramid solvent…..and, no real surprise here, the borrowers down at the bottom are not paying. So in order to save time and costs, the servicers took shortcuts, with little regard for safeguarding the homeowner. Some states will continue to investigate every step of the process — from origination of a loan to its securitization, and they will prosecute to the fullest extent of the law those who take advantage of the homeowners.
These practices resulted in 11 Mortgage Banks signing a consent order which includes agreement to cease and desist from fraudulent and shoddy business practices. Recent Attorney Generals have said that common practice in the industry saved the banks 20 billion.
The Attorneys general have worked for the past year with the 11 major banks and now have a proposal that:
- Pay into a fund used to compensate borrowers who have claims after their home has been sold in foreclosure.
- Includes principal reductions for homeowners absolves lenders of Deceptive Trade litigation by homeowners.