By Robbie Whelan
This week we saw the first major legal challenge to the mortgage servicers and lenders at the center of the kerfuffle over “robo-signers”—the mortgage servicer employees who allegedly signed thousands of documents authorizing foreclosures across the country, without actually having reviewed the loan documents, as the law requires.
Some say these middle-manager types (who have been identified at GMAC Mortgage LLC, J.P. Morgan Chase & Co., Bank of America Corp. and OneWest Bank, in depositions by consumer lawyers), if they did what they say they did, committed fraud in hundreds and even thousands of foreclosure cases by claiming knowledge of a financial matter of which they had no personal knowledge.
This chaffed Ohio Attorney General Richard Cordray so badly that he filed suit Wednesday against GMAC and its parent company Ally Financial Inc., seeking $25,000 in civil penalties for each instance of fraud, plus untold thousands of dollars more in consumer restitution.
That means, for each time a robo-signer’s signature appears on an Ohio home loan (and all we know at this point is that there are “hundreds” such loans) and the signature was not based on personal knowledge or properly notarized, the state’s AG could make them pay big bucks in penalties.
At the same time, Mr. Cordray sent stern letters to Wells Fargo & Co., Chase, Bank of America Corp., and CitiMortgage, Inc. asking them all to halt foreclosures in Ohio and meet with him to discuss how to solve the problem. His office sent a similar letter to GMAC before suing, suggesting that similar legal action against these other banks is not far off.
State AGs have been raising a ruckus over the foreclosure document fraud issue since it emerged in the public consciousness late last month. Top law officers in California, Connecticut, Illinois, Iowa, Maryland, Massachusetts, North Carolina and Texas have all sent similar letters to lenders and servicers, demanding either answers or a halt to foreclosures until the matter is resolved.
But the interesting thing about Mr. Cordray’s case in Ohio is that it specifically names Jeffrey Stephan, GMAC’s alleged robo-signer, as a defendant.
In an interview Wednesday, Mr. Cordray explained why Mr. Stephan was a target of the suit:
“Fraud is fraud. If you’re ordered to violate the law and you violate the law, you’re not innocent,” he said. “That’s the Nuremberg defense. In the trials after World War II, the defendants, the Nazis claimed, I did this, but someone ordered me to do it. You can’t just say you’re not responsible because someone told you to do it.”
Does Mr. Stephan deserve to be compared to a Nazi? Was he actually maliciously signing fraudulent documents, or just doing what he was told to do? Well, we can’t know for certain, because GMAC immediately circled the wagons around Mr. Stephan as soon as this news broke.
GMAC has repeatedly declined to make him available for comment, and calls to Mr. Stephan’s house, cell phone and wife, as well as messages sent through the social-media network MySpace.com have gone unreturned. A Washington Post reporter even drove to his house in Sellersville, Pa. to chat with him, only to be turned away by Mr. Stephan.
A GMAC spokeswoman, in response to questions about the suit, wrote in an email that “there was nothing fraudulent or deceitful about GMAC Mortgage’s practices,” and vowed that the company “will vigorously defend this lawsuit and expects to be fully vindicated by the Ohio courts.”