A24 Economy & Business
Case of GMAC manager prompts wider concerns about lenders’ practices
BY BRADY DENNIS
sellersville, pa.— The robo- signer lives on a quiet street in this small town an hour’s drive northwest of Philadelphia. His modest two-story house,
for which he paid $118,000, sits on a corner lot just down the street from the local Moose Lodge and an all-night diner. A weathered Chrysler Concorde is parked in the driveway, and a Toyota Camry sits by the curb. Many large mortgage lenders
have come to rely on a relative handful of so-called robo-signers
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THURSDAY, SEPTEMBER 23, 2010 ‘Robo-signer’ played quiet role in huge number of foreclosures
such as Jeffrey Stephan, 41, to attest to the accuracy of thou- sands of home foreclosure docu- ments across the country. These workers are not the Wall Street masterminds who created ever more complex mortgage-backed securities and fueled the sub- prime mortgage boom, but rath- er “affidavit slaves” with modest incomes andmountainous work- loads. Their actions are leading law-
yers representing foreclosed ho- meowners to claim that lenders have no legal standing if the filingsweren’t reviewed and veri- fied, and to argue that the cases should be thrown out. Fornearly six years, Stephan—
who declined to talk to a reporter — has made the daily commute south along Route 309, past cornfields and big-box stores, to
an office park in Fort Washing- ton. From his cubicle inside a
sprawling beige stucco building, Stephan works as the leader of the document execution teamfor GMAC Mortgage. He has signed off on as many as 10,000 foreclo- sures in a month, according to court documents. That’s barely a minute per case, assuming he works a normal eight-hour day. His signature indicated that
the information in the cases was accurate to the best of his knowl- edge, and that he had signed in the presence of a notary. The problem was, that didn’t always happen, according to depositions that Stephan gave in December and June for court cases involv- ing families trying to keep their homes. He stated that hewould glance
at a borrower’s name, the debt owed and a few other numbers, but simply assumed most of the information in the files was cor- rect. Stephan,who hasmore than a dozen people working under him, told attorneys that he had three days of training for the position and that he didn’t know how the “summary judgment” affidavits he signed were used in judicial foreclosure cases. Stephan’s admission has cast
into doubt thousands of mort- gage foreclosure filings. Ally Fi- nancial, the nation’s fourth-larg- est home lender and GMAC’s parent company, halted evictions of homeowners this week in the 23 states that mandate a court judgment before a lender can take possession of a property. A company spokesman this week said that the company ser-
vices loans from “hundreds of lenders.” Among them: govern- ment-backed mortgage giants Fannie Mae and Freddie Mac, both of which have undertaken internal reviews to figure out the scope of any potential problems. Already, lenders in states such as Maine and Florida have begun to withdraw affidavits with Steph- an’s signature, essentially ending a number of foreclosure cases. The case also has prompted a
broader question of howandwhy some of the nation’s largest lend- ers came to rely on middle man- agers such as Stephan, who told attorneys that his compensation wasn’t tied to the volume of documents he signed. Stephan answered the door at
his house late Tuesday wearing a T-shirt and shorts. He said only “No, thanks” before retreating
inside. Nearby, in the bowels of the
Bucks County courthouse in Doylestown, Pa., themountain of mortgage foreclosures tells a more personal story. While Stephan and other robo-signers often serve as anonymous bu- reaucrats foreclosing on home- owners across the country, they also are kicking out their own neighbors. Stephan signed off on the fore-
closures of a $216,000 home over in Pipersville and a $202,500 home on Inkberry Road in Levit- town. He signed off on another for a $183,000 house that had belonged to a couple up in Quak- ertown. GMAC and other lenders have foreclosed on more than a thousand homes inBucksCounty since the crisis began.
dennisb@washpost.com
Shortcuts, forgeries and fake documents mar foreclosure process mortgage from A1
ers to contest some of the more than 2 million foreclosures that have taken place since the real estate crisis began. The company sought to play
down the impact of Stephan’s actions, saying this week that what he did amounted to a “tech- nical” error but that the docu- ments themselves were “factually accurate.” Ally said it had no fur- ther commentWednesday.
Forgeries Ally wasn’t the only major
lender that had a foreclosure pro- cess dependent on a few corpo- rate bureaucrats. Beth Ann Cottrell said in a
sworn deposition inMay that she signed off on thousands of fore- closures a month for J.P. Morgan Chase even though she did not verify the accuracy of the infor- mation. In one instance in Palm Beach,
Fla., Cottrell signed off on two documentsthat stated conflicting amounts of mortgage, the court testimony states. Cottrell claimed that both were signed by the bor- rower at closing. But the home- owner recognized that her signa- ture had been forged, her attor- ney Christopher Immel said. The attorney added that such forger- ies are common among the cases he’s seen. J.P. Morgan Chase de- clined to comment. In Georgia, an employee of a
document processing company, Linda Green, for years claimed to be executives of Bank of America, WellsFargo,U.S.Bankanddozens of other lenders while signing off on tens of thousands of foreclo- sure affidavits. Inmany cases, her signature appeared to be forged by different employees. Green worked for a foreclosure
document company owned by Lender Processing Services. The company is being investigated by
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aU.S.attorney in Florida for alleg- edly using improper documenta- tion to speed foreclosures. Lendershave already started to
withdraw foreclosures that had Green’s name on them. Green also submitted to courts
documents that listed “Bogus As- signee” as the owner of a mort- gage instead of the real name. In another case, she signed as the vice president of “Bad Bene,” a made-up company. Michelle Kersch, a senior vice president for Lender Processing Services, said in an e-mailed statement Wednesday that the names were just “placeholders.” “Unfortunately, on occasion, incomplete documents were in- advertently recorded before the missing information was ob- tained,” she said. “LPS regrets these errors and the use of this particular placeholder phrasing.” The company declined to com-
THE WASHINGTON POST
InGeorgia, Linda Green worked for a foreclosure document company owned by Lender Processing Services. In many cases, her signature appeared to be forged by other employees.
“There are procedures to be followed in order to get a foreclosure, and you either get it right or not. Either you’re pregnant or not. There’s no in-between.”
—Arthur M. Schack, a Kings County Supreme Court judge in Brooklyn who has become infamous among some of the nation’s most powerful banks for rejecting foreclosure motions that come across his courtroom.
ment further, citing the pending criminal investigation. A large chunk of the nation’s foreclosures are being initiated by three companies owned by the federal government: Ally, Fannie Mae andFreddieMac.Fannie and Freddiehavesaid theyare looking at the matter but refuse to reveal the numbers of affected home- owners. TheObamaadministrationhas
repeatedly said it would try to help homeowners facing foreclo- sure. But its principle mortgage- relief effort is faltering. More than half of those whoenrolled in the program are have now fallen out of it, the Treasury Depart- ment saidWednesday. This week, Treasury Secretary
Timothy F. Geithner and the Obama administration’s newly appointed consumer protection adviser, Elizabeth Warren, also vowed to simplify the process for getting a mortgage. But when asked to respond to problems plaguing foreclosures
at the companies controlled by theTreasury,aspokesmanrepeat- edly declined to respond to ques- tions, saying only that the agency does not involve itself in the com- panies’ day-to-day affairs.
Judges’ oversight Some of the problems in fore-
closure paperwork are being cre- ated because mortgage loans were repackaged and resold to investors so often that the physi- cal documents become lost. It’s the job of a document processor to present and vouch for the au- thenticity and accuracy of these papers, but attorneys for home- owners have unearthed examples where critical records are forged. In theory, a judge should re-
view the files one more time. But after the crisis produced massive numbers of delinquent home- owners, judges in many cases be- came overwhelmed. Some simply took at face value
the documents handed over to them by the lenders — who in many cases were not checking the files, either, according to inter- views with judges, attorneys and consumer groups. In some Florida courts, for in-
stance, many judges automatical- ly approve a foreclosure unless a borrower can point to a specific problem. Homeowners are given five minutes for a presentation. Often, they do not bother to show up.
Arthur M. Schack, a Kings
County Supreme Court judge in Brooklyn, said it’s clear those in- volved in the foreclosure process are taking the legal requirements too lightly. They forget, he said, that there’s a bigger picture to think about: People are losing their homes. “There are ramifications on so-
ciety and neighborhoods,” he said.
Schack has become infamous among some of the nation’s most
“
powerful banks for rejecting fore- closure motions that come across his courtroom—about half of the hundreds of files that he has re- viewed over nearly three years. He said Ally’s document-process- ing violations shouldn’t be dis- missed lightly. “There are procedures to be followed in order to get a foreclo- sure, and you either get it right or not. Eitheryou’repregnantor not. There’s no in-between,” he said. But Judge Isaac Garb, a retired
trial judge in Bucks County, Pa., who has heard many foreclosure cases and still oversees mortgage mediations, had a different view. He said that because foreclo-
sure files contain standard lan- guage, document processors such as Stephan do not need to review every page. He added that the signers are verifying only that the information in the file is “trueand correct to the best of his/her knowledge, information and be- lief.” Often, homeowners are using
minor problems in the docu- ments simply to stall the foreclo- sure process as long as possible, Garb said. David Berenbaum, chief pro-
gram officer for the nonprofit National Community Reinvest- ment Coalition, said companies eager to get bad loans off their books quickly have given rise to a foreclosure system that is as faulty as the excessive lending that created the problem in the first place. “What’s happened here is that
there are these foreclosure ma- chines that don’t do due diligence and that are profiting at the ex- pense of consumers,” he said.
chaa@washpost.com dennisb@washpost.com
Dennis reported from Doylestown, Pa. Staff researchers Julie Tate and Magda Jean-Louis contributed to this report.
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