GMAC Mortgage LLC, after defeating a bid by homeowners in Maine who sought a federal court order blocking sales and evictions, can sell foreclosed homes in the state.
U.S. District Judge D. Brock Hornby, at a hearing yesterday in Portland, Maine, declined to grant a temporary restraining order that a plaintiff’s lawyer said would have kept GMAC from selling foreclosed homes and evicting residents.
The judge said his decision hinged on the power of federal courts to stop proceedings in state courts, where foreclosures take place. He said individual homeowners who face losing their homes in a foreclosure sale can go to state court to stop the sales, he said.
“This decision is based on the limited authority federal courts have,” Hornby said.
The Maine case, filed in state court in October and moved to federal court by GMAC in November, involves five homeowners who are suing GMAC, claiming the company relied on defective court documents in seizing homes. The plaintiffs are seeking to represent Maine homeowners who are facing foreclosure by GMAC or who lost their homes in a GMAC foreclosure during the past six years and whose case relied on false documents, according to court documents.
GMAC had agreed to suspend foreclosure sales and evictions in the state until the judge ruled on the request for the restraining order, Andrea Bopp Stark, a lawyer for the plaintiffs said. That agreement expires yesterday.
Maine Attorney General Janet Mills is considering joining the GMAC lawsuit, Assistant Attorney General Linda Conti said in an interview yesterday. The office is also considering filing its own lawsuit against GMAC, she said.
“I have concerns about the integrity of the state court process,” said Conti, who attended yesterday’s hearing. “The attorney general will have to decide whether this matter is so important to the public interest that we should file our own proceeding.”
GMAC owned by Detroit-based Ally Financial Inc., was sued by Ohio Attorney General Richard Cordray, who is accusing the company of fraud for submitting false documents in foreclosure cases in the state, according to the complaint. The attorney general’s office said it’s seeking a court order to block GMAC from proceeding to foreclosure in any pending case in Ohio or selling foreclosed properties in which a false affidavit was submitted.
GMAC said in a statement that there was “nothing fraudulent or deceitful” about its foreclosure practices and that it would be “fully vindicated.”
Attorneys general in all 50 U.S. states are investigating whether mortgage servicers relied on false documents and signatures to justify foreclosures. The probe, announced in October, came after banks said they were suspending repossession efforts to review foreclosure procedures. GMAC said in September that it was suspending foreclosure sales in 23 states.
GMAC is the fifth-largest residential mortgage servicer in the U.S., servicing 2.4 million loans, Tom Marano, chief executive officer for mortgage operations at Ally, told a congressional committee last month in prepared remarks. Marano said GMAC’s process for preparing foreclosure affidavits was “flawed” and that it was reviewing foreclosures and submitting new paperwork when necessary.
“GMAC Mortgage remains confident about its ability to proceed with foreclosure sales and evictions in cases where all of the relevant factual information supporting foreclosure has been confirmed,” Gina Proia, GMAC spokeswoman, said in a statement. Yesterday’s court ruling was consistent with that approach, she said.
The homeowners in the Maine lawsuit are relying on the deposition of a GMAC employee, Jeffrey Stephan, who said under oath in June that he signed 8,000 foreclosure documents a month, according to court papers. Stephan signed papers in Maine foreclosures without personal knowledge of the cases, lawyers for the homeowners said.
“This system does not work if GMAC commits abuses and fraud,” Stark told Hornby during arguments yesterday. “GMAC has repeatedly abused this process by presenting fraudulent representations to courts around the state.”
Two of the homeowners in the Maine case are facing foreclosure and remain in their homes, Stark said in an interview. GMAC won foreclosure judgments against the other three plaintiffs, and one of those, Michael Holmes, is still in his home in Belfast, Stark said.
The Maine case against GMAC is one of at least two dozen potential class-action lawsuits across the U.S. against banks and mortgage-services companies over their foreclosure and loan- modification practices. Banks facing lawsuits include Bank of America Corp., Wells Fargo & Co., and JPMorgan Chase & Co.
GMAC said in a Nov. 4 court filing that the Maine plaintiffs, if allowed to proceed as a class, could seek more than $2 billion in damages and attorney fees. Since Jan. 1, 2005, it has filed 1,156 foreclosure actions in the state on mortgages that it serviced, according to the filing.
The plaintiffs in the Maine case hope to move their bid to stop foreclosure sales and evictions back to state court, where the lawsuit was first filed, because federal courts can’t interfere with state court proceedings, Stark said in an interview. She argued during the hearing that Hornby could issue a temporary restraining order pending a decision on moving part of the case to state court.
Hornby said the plaintiffs’ chances of moving part of the case out of federal court are “very, very slim,” which he said was the most important of his reasons for not granting the restraining order.
Thomas Cox, a lawyer for the plaintiffs, said after the hearing that GMAC took advantage of federal legal procedures to move the case to federal court in a move to block a temporary restraining order “and deprive these plaintiffs of an opportunity to have their claims considered on the merits.”
The case is Bradbury v. GMAC Mortgage LLC, 10-00458, U.S. District Court, District of Maine (Portland).
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