Ohio became the first state to level a civil fraud suit against a major servicer, claiming the company misled courts in hundreds of foreclosure cases by filing fraudulent affidavits.
Attorney General Richard Cordray on Wednesday announced the suit against GMAC Mortgage and its parent Ally Financial Inc., as well as GMAC employee Jeffrey Stephan, whose deposition brought to light the practice of "robo-signing" affidavits without verifying the information or having a notary present.
The lawsuit, filed in Lucas County Common Pleas Court, is seeking a permanent injunction to prevent GMAC from proceeding with any pending foreclosures in the state. The suit is also asking for civil penalties of up to $25,000 per violation as well as an unspecified amount of restitution.
Additionally, Cordray sent letters to Bank of America Corp. and JPMorgan Chase & Co. asking the banks to suspend foreclosure proceedings. He also requested meetings with Wells Fargo & Co. and Citigroup Inc. to discuss their foreclosure affidavit procedures.
The actions come two weeks after GMAC halted foreclosure sales and evictions in 23 states, including Ohio, to review the cases and ensure no errors were made after discovering problems with the way affidavits were executed. JPMorgan Chase and B of A have also halted foreclosures in those states — where the procedure is handled by courts — because of similar problems with documents.
GMAC spokeswoman Gina Proia would not comment on the lawsuit specifically, but said the company is "confident that we have not inappropriately foreclosed on any borrower."
She said GMAC has "strengthened" its processes related to the execution of affidavits and that it "will remedy any errors that are found."
Other attorneys general, including those in Connecticut, North Carolina, Illinois and Iowa have opened investigations into the foreclosure practices at GMAC. North Carolina’s AG expanded the investigation to 14 other lenders on Wednesday.
Experts anticipate more legal fallout in the coming weeks, possibly even federal investigations. On Wednesday, U.S. Attorney General Eric Holder was quoted by Dow Jones as saying the Department of Justice is looking into the matter.