A Maine state court judge reprimanded GMAC mortgage over its foreclosure practices and concluded that it submitted a company official's affidavit to support a foreclosure in bad faith.
The ruling came in a case that revealed that GMAC, now part of Ally Financial Inc, filed thousands of affidavits in which officials falsely said they reviewed mortgage documents and concluded that they justified foreclosure.
Ally last month confirmed that there were procedural shortfalls, and halted evictions and post-foreclosure proceedings by GMAC in 23 U.S. states. Larger rival JPMorgan Chase & Co (JPM.N) on Wednesday decided to temporarily suspend foreclosure proceedings after learning of similar problems.
In his Sept 24 ruling, Maine District Court Judge Keith Powers ordered mortgage financier Fannie Mae (FNMA.OB) to cover some attorney's fees of Nicolle Bradbury, a borrower defending against foreclosure, because of GMAC's misconduct as its servicing agent, a date-stamped copy of the ruling shows.
The court accepted an amended affidavit, and the facts that led to the foreclosure in the case are not in dispute, Ally spokeswoman Gina Proia in a statement.
It remains unclear to what extent other courts around the country make take similar action in foreclosure cases involving GMAC or other mortgage loan servicers.
Banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year and just 100,000 as recently as 2005, real estate data company RealtyTrac Inc said on Thursday.
According to the ruling, GMAC official Jeffrey Stephan had signed an affidavit supporting the Bradbury foreclosure without reading it or being in the presence of a notary.
Powers said Stephan in a June deposition had testified that he signed about 400 documents per day. Six months earlier, he testified in Florida to signing some 10,000 documents a month.
The judge said he was particularly troubled that GMAC's high-volume and careless approach to affidavit signing is not a new issue. He pointed to a 2006 Florida court order directing GMAC to improve its procedures.
The experience of this case reveals that, despite the Florida court's order, GMAC's flagrant disregard apparently persists, Powers wrote. It is well past the time for such practices to end.
The Court agrees with defendant, and finds to its satisfaction that the Stephan affidavit was submitted in bad faith, Powers added.
John Aromando, a lawyer for Fannie Mae and GMAC, did not immediately return a request for comment.
Investigators in at least six U.S. states, including several attorneys general, are investigating foreclosure practices at GMAC, JPMorgan or both, and calling for such practices to be defended or halted.
On Friday, Connecticut Attorney General Richard Blumenthal called on state courts to freeze home foreclosures for 60 days until procedures could be improved, to stop what he called a foreclosure steamroller.
The case is Fannie Mae v. Bradbury, Bridgton District Court, Cumberland County (Maine), No. BRI-RE-09-65.
(Reporting by Scot Paltrow in Washington, D.C. and Jonathan Stempel in New York, editing by Gerald E. McCormick and Robert MacMillan)