BiggerPockets

The document flaws at GMAC were stated by a GMAC employee in a deposition as part of a lawsuit - I tend to believe they are real, since the document counts are fairly large, and the practices used to keep up with that volume will almost certainly lead to short-cuts. The fact that the GMAC employee did not have a record of what he signed, but that the notary did is another telling piece. Oh, and let's not forget that the signatures aren't being done under the watchful eye of the notary - the documents get pre-signed, and then sent to the notary in a batch. Is that notary really 100% certain of who actually signed, as they are supposed to be?

The JP Morgan Chase situation is probably very similar IMO.

Do people who've already bought REOs need to be concerned, or is the title policy enough to cover anything that could occur? Perhaps if lawsuits are filed they could reach back to the past.

Not an attorney or title agent - but I will offer my opinion here.

I am in a judicial state. As such, all cases get heard before a judge and things must follow the legal process. Mistakes may happen, and that offers the plaintiff or defendant an opportunity to appeal any decisions that are made. These are civil (not criminal) cases, so I believe that once the deadline for appeals passes the decision then is final.

Now, if there are damages to be sought by somebody long after the cases have been through the courts - in that case the lenders (and the GSEs too) might be forced to pay. I don't know if that will affect title any, but unless it is a quit claim deed there is some warranty provison for the seller to defend the title (so that falls upon the lender or GSE).

But the whole thing sure sounds like the stuff that class action suits are made from.

This just hit the Drudereport... http://www.washingtonpost.com/wp-dyn/content/article/2010/10/01/AR2010100105392_pf.html

and... to add insult to injury there are a few other things happening that could freeze the entire system... read here...

http://www.thinkbigworksmall.com/mypage/archive/1/53413

Putting this in perspective, this issue is about state laws not being followed, where due diligence is required. SOme states, like Missouri, requires no due diligence at all, in fact, the Trustee is held harmless from his duties! Any lender can tell the trustee that a borrower is behind without proving anything. The Trustee starts the process, notice of demand, publication and then off to the courthouse for the sale. The borrower will have to get a court order to stop the process, the Trustess has no obligation to even speak to the borrower. Any claim for any unlawful foreclosure falls on the lender.

If someone is behind on the payment, they defaulted in any state! If in any state the process is accomplished illegally, what's the damage? We will see. Even if the property was given back to the borrower, they are still in default and to a greater amount now than then, they still can't pay, so they still lose the property! What's the point?

In some more liberal states, I can see some penalty, maybe based on any deficiency amounts sought by the lender, maybe for a few days of being out of the house earlier than they would have been and maybe a hassel factor.

In some states, I would imagine that the state would move in, fine the lender and keep the money for the state and the borrower would receive nothing, as is customary in Missouri. We have some real crooks in Jefferson City!

http://www.nytimes.com/2010/10/08/business/08frozen.html

The latest word is that it's not just GMAC, BofA and Chase but all of them are worried they will lose their bailout money over this screwup. They're hiring warm bodies like crazy to examine the documents and plan to have it resolved in 30-45 days.

My insider didn't have much hope for my fannie mae deal sailing through without being stalled.

I had an offer this morning and another one a few days ago on properties that were pulled off the market.

This issue has many different aspects, so it will indeed be interesting. One of the most disturbing is the accusation of fraud of the banks in forging documents in order to proceed with the foreclosures.

Congress has tried to rush through HR 3808 which basically is going to let the banks off the hook. Obama vetoed it, but watch for it to come back.

Good ol' Brian & Frank discuss it in this short video:

https://mail.google.com/mail/u/0/?ui=2&view=bsp&ver=ohhl4rw8mbn4