Eternalized in Slang

Jeffrey Stephan, the back-office GMAC Mortgage employee who rubber-stamped foreclosures without verifying them, has made his way into the lexicon.

Last week, someone entered "Jeffrey Stephan" in Urban Dictionary, an online archive of slang terms proliferated by users, as a verb for "To have a job duty or description which under deposition will be found to be lacking in ethics and legality. To be thrown under the bus by your employer."

As in, "Did you see that way his company totally Jeffrey Stephan-ed him?"

The so-called robo-signer became the latest symbol of the housing crisis last week following reports that he routinely signed off on thousands of affidavits a month without verifying the information in them or signing them in a notary's presence.

The practice, described in detail in a deposition of Stephan, came to light after GMAC, the mortgage unit of Ally Financial Inc., said it was suspending evictions of homeowners and sales of seized properties in 23 states while it investigates potential problems arising from a "procedural defect" in the execution of court documents. The news put a spotlight on the negligence that exists in the foreclosure process.

GMAC stressed that the problem was not related to just one individual. (The name of at least one other robo-signer has since surfaced.)

The Urban Dictionary site, which has logged more than 5 million entries since its creation in 1999, lists six definitions for the word "mortgage," including "That weight around your neck that will never be alleviated until you die or eventually pay off by the time you are 107" and "Middle-class slavery."

There are no entries for "foreclosure."

Eye on GMAC

Meanwhile, the fallout from GMAC's announcement continues.

Ohio Attorney General Richard Cordray issued a letter Tuesday to state judges requesting a special review of all GMAC foreclosure cases.

"I wanted to draw your attention to this issue," he wrote. "More broadly, I urge you as administrators to share this letter with your colleagues and urge them to exercise caution when approving any foreclosure orders involving GMAC. Further, I encourage you to consider whether additional administrative procedures need to be established to protect homeowners who are facing the threat of foreclosure."

Cordray has been particularly active on the foreclosure front, being the first attorney general in the country to file a lawsuit against a loan servicer, claiming violation of the state's consumer laws. Currently, he has cases pending against Carrington Capital Management LLC's servicing unit, Wilbur Ross' American Home Mortgage Servicing Inc. and HomEq Servicing, which is now a part of Ocwen Financial Corp.

Cordray's letter follows similar if not more aggressive actions by attorneys general in Iowa, Illinois, North Carolina, Connecticut and California.

In Connecticut, Attorney General Richard Blumenthal said Monday his office was investigating defective foreclosures filed by GMAC and demanded the company halt all foreclosures in the state.

"The GMAC/Ally foreclosure steamroller should be stopped so the company can be held accountable," Blumenthal said in a press release. "The bank's apparent failure to follow basic legal procedure — a potential fraud on the court — is appalling and unacceptable. Our investigation will enable strong legal action against GMAC/Ally, if warranted by the facts and the law."

Attorneys general in North Carolina and Iowa also have opened investigations into the foreclosure practices at GMAC.

On Friday, Edmund G. Brown Jr., the attorney general in California, asked that GMAC "prove immediately that it is complying with state law or, if it cannot, to cease and desist from foreclosing on California homes." Also Friday, Illinois Attorney General Lisa Madigan sent a letter to GMAC requesting certain information on its foreclosure cases in the state and demanding a meeting with the company.

Florida Attorney General William McCollum said last month that his office was investigating the foreclosure practices of three law firms in the state to determine "whether improper documentation may have been created … to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved."

The Un-Walkaway

Buyers of foreclosed homes through courthouse auctions are finding interest from an unusual crop of clients: the original owners who are still living in the homes.

John Helmick, the chief executive of Gorilla Capital in Eugene, Ore., bought four homes this year that he sold back to the original owners at a discount.

Last week, he bought a house at auction and within six hours had sold it back to the original occupants in a pre-arranged deal. Helmick pocketed $10,000 for his trouble. The defaulted homeowner paid $93,368.81 for the home, which extinguished a $130,000 first lien.

"Is this going to be a trend, the new way to strategically default and refinance your home?" Helmick said. "I sure hope so!"

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