GMAC files for Chapter 11 Bankrutpcy

My client forwarded a letter they received from GMAC MORTGAGE, dated May 14, 2012 and requested that I share this information on my blog: My client received a letter stated that Residential Capital, LLC (ResCap) and its subsidiaries, including GMAC Mortgage are restructuring under Bankruptcy Chapter 11. The client had no idea ResCap owned their mortgage. Their original lender was Country Wide, and had changed hands 5 or 6 times before GMAC took over their loan. GMAC then renamed itself Ally Financial.

The client was in the middle of a Home Modification Loan and will most probably have to start all over again filling out paperwork for the modification.

I’m not singling out GMAC specifically, but they are one of the largest mortgage servicers and faced monumental problems in 2010. At that time, they were foreclosing on a New York City homeowner and missing crucial paperwork to seize the property.

GMAC had been creating and signing documents in the names of companies that made the original loan. In this particular case, the original loan was with a notorious subprime company called Ameriquest Mortgage and had gone out of business in 2007.

GMAC began thinking of a way to create a document that would pass legal muster. Bailed out by taxpayers in 2008, they filed a document with New York City authorities that said the delinquent Ameriquest loan had been assigned to them “effective August 2005”. The document was dated July 7, 2010, (three years after Ameriquest ceased to exist) and signed by Jeffrey Stephan, a “Limited Signing Officer” for Ameriquest. Stephan, at that time, was the head of GMAC’s “Document Execution” team. Thus began, and became, the center of, the “robo signing” debacle. Stephan acknowledged in sworn testimony he had been signing 400 such documents each day.

As of last year, GMAC was still pursuing foreclosures signed by Stephan. Generally, banks don’t worry their documents will be challenged. Homeowners rarely contest foreclosure actions. In New Jersey alone, in 4,000 foreclosures, only about 4% of the homeowners had contested the action.

When homeowners do challenge banks’ foreclosure documents, they can have success. The Vermont Supreme Court threw out a foreclosure case handled by GMAC due, in part to an assignment document signed by “Stephan”.

The best thing any homeowner can do is save every receipt, every letter and statement regarding their home loans and payment history. With the selling and reselling, restructuring and bankruptcy filings, it is no wonder “paperwork” slips through the cracks, causing homeowners’ heartbreak.

What will become of GMAC (owned by ResCap) after filing for Chapter 11 bankruptcy?

The filing is intended to speed up ResCap’s sale of its mortgage origination and servicing businesses to Nationstar Mortgage, LLC. Nationstar Mortgage, is owned by Fortress Investment Group LLC. Nationstar Mortgage also operates under the Champion Mortgage brand. Fortress Investment Group is a publicly-owned hedge fund and investment management company based in New York City.

When will the mortgage problems abate? Good question, but I can tell you it will be years before everything is sorted out. If you’re a homeowner who is facing, or will be facing foreclosure, contact a qualified attorney as soon as you can. An attorney can also help sort through this complex system if you’re in foreclosure.

Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.

This article is not intended as legal advice. The opinions of this article are solely the opinion of the author.

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13 comments

  1. So what does that mean to those us NOT behind on our mortgages that are/were owned by GMAC? What happens to us? What do we need to do? The legal document we received was so full of legalese I have no clue what it means.

    1. It means that you still must pay your mortgage. However, if you fall into financial difficulty, the practical effect is that GMAC will be much less likely to work with you (see blog post GMAC: After Filing Ch. 11, Pulls a Round-Around with Homeowners).

      The irony is that GMAC sent letters to all borrowers stating, in effect, that they are not going to pay their debts but, despite that fact, you must pay your debt to them. Sad and laughable all at the same time.

  2. so I am not surprised with the large corporation screwing “us” over…I was worried about changes in payments, dates, addresses….any excuse to pounce! we are not behind or late..it’s just all this uncertainty is worrisome. thanks for your feedback. :-)

    1. Your payment terms should not change. However, your note may be sold or transferred to someone else- this may change the address and who you make your payment to. You should receive notice of this if that happens. You are welcome!

  3. When a note is sold or transferred, shouldn’t the homeowner receive proof that they bought the note. How are they just going to pass properties from one bank to another without paying it off. I need proof that the new collector owns my debt. Passing a mortgage to another seems like a scam to me. I need proof of purchase and ownership.

  4. What about those in foreclosure with GMAC currently? Does the lower court still have jurisdiction over thier case? Should we send a notice with the attached bankruptcy filing to the court and demand to have the foreclosure case dismissed? Also, has GMAC lost representation when they list the foreclosure firm as a creditor under the bankruptcy?

  5. Will I have trouble with a short sale due to the Bankruptcy filing? I am trying to avoid missing payments on my mortgage as well during the short sale.

    1. The short answer is yes. Once you file bankruptcy, all your property becomes property of the Bankruptcy Trustee, as part of your estate. The property can not be transferred or sold until the Trustee abandons the property or approves of the transfer.

  6. i did a home modification with gmac, but am unsure about all the fees i ended up paying. and then adding years onto the back end of my mortgage. i hear paper work getting messed up all the time, is there any way to check that all the numbers are right

    1. You can contact the lender and request a payment history and an escrow analysis. Those documents should demonstrate what has been charged to the account and should also reflect your payments. However, they are extremely difficult to read. If your home is located in Colorado, you can call my office at 303-618-2122 and request a consultation. In your consultation, I can translate that document for you, if you wish.

  7. the new lender is likely to buy un-performing loan portfolio for a fraction of its face value, yet demand payment in full from the borrowers. How ironic and how sad. The banks got their bail out and home owners got nothing.

  8. I HAVE A HOME IN MICHIGAN MY WIFE,SON THAT IS IN THE USMC BEEN OVER SEAS FIGHTING FOR YOU COUNTRY THAY ARE TRYING TO FOR CLOSE ON HOME WAT DO WE DO

    1. I am not licensed to practice law in Michigan and this is not intended to be legal advice. Please contact a local practitioner in your area. I would contact the servicer and the law firm that is foreclosing and provide them with the deployment orders.

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