GMAC's foreclosure foul-up puts predatory lenders on hot seat
By Monique W. Morris
8:24 AM on 09/24/10
This week, it was revealed that critical errors made by Jeffrey Stephan, the leader of an Ally Financial foreclosure document team responsible for approving approximately 10,000 foreclosures a month--may have caused people in as many as 23 states to be "illegally driven" from their homes. Ally, formerly known as GMAC Mortgage LLC, is the nation's fourth-largest home lender.
Florida Attorney General Bill McCollum is investigating three law firms for allegedly providing fraudulent affidavits in foreclosure cases, which allowed for the lender to proceed with a repossession without a trial.
Despite earlier reports that Ally was going to suspend foreclosures until the investigation is complete, the company issued a statement on Monday that read, "in fact, all new residential foreclosures are continuing in the ordinary course of business with no interruption in our usual practice."
In a sworn deposition, Mr. Stephan testified that he repeatedly did not perform two functions that are critical to ensuring the integrity of the process: 1) conducting a review of cases to make sure the cases were legally justified, and 2) signing documents in the presence of a notary.
Is this the "usual practice" that Ally proudly states it will continue?
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Though the mortgage crisis has affected the majority of Americans in some way, it is now no secret that lenders disproportionately offered subprime products to people of color, which combined with persistently high long-term unemployment rates among these populations, has led to an increased likelihood of foreclosure in communities of color.
Nationwide, African-Americans were 15 to 16 percent more likely to receive a higher-rate Adjustable Rate Mortgage (ARM) purchase loan than their similarly situated white counterparts. Research conducted by the Department of Housing and Urban Development (HUD), the National Community Reinvestment Coalition, and others have confirmed that subprime lending was five times more prevalent in African-American neighborhoods than in white neighborhoods, and national trends suggest that these disparities were largely due to discriminatory lending practices that have adversely impacted the accumulation of wealth in African-American communities. According to a HUD report, even when income and credit risk were equal, African-Americans were up to 34 percent more likely to receive higher-rate and subprime loans with a prepayment penalty than are their similarly situated white counterparts.
RealtyTrac reports that banks seized over one million homes in August--a record number of repossessions, with an additional 3.2 million homes currently in the process of a foreclosure. With millions in this pipeline, the Center for Responsible Lending predicts that African-American communities will lose $194 billion in wealth just from the residual impact of foreclosures (e.g. depreciated home value, etc.) by 2012.
Similarly, an additional $177 billion in losses is predicted for Latino communities. While no single factor is responsible for the accumulated disadvantage presented by unmanageable subprime products and subsequent home foreclosures, the failure to adhere to fair lending laws and principles is a factor.
Earlier this year, the NAACP published its Fair Lending Principles, in which it calls upon lenders to "consider foreclosure to be the last resort," stating that lenders should "explore all appropriate alternatives before completing a foreclosure sale." To deny homeowners their due process in any effort to repossess a home is not only illegal, it is well below our expectation as consumers. To be clear, we expect that this important, and highly sensitive transaction, will be handled with fairness and integrity.
Fair Lending does not include ignoring necessary functions to conveniently expedite a foreclosure process--no matter how many are in the pipeline. Instead, our collective priority should be in challenging those lenders who dismiss major process violations as technicalities, to observe consumers' rights and discontinue the arrogant and exploitative business model that contributed to our nation's fiscal collapse. Business as usual must change
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Friday, September 24th 2010 at 9:41AM
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