GMAC Mortgage Foreclosures and the Sorry State of the Economy
GMAC Mortgage is the fourth-largest mortgage lender in the United States, behind Bank of America, Wells Fargo, and JP Morgan Chase Bank. As of September 2010, GMAC Mortgage held approximately $250 billion dollars in mortgage portfolios. The state of the economy over the past several years has been abysmal, with property values bottoming out and adjustable rate mortgages resetting at much higher rates of interest, rending many homeowners incapable of meeting their monthly payments. Combined with a weak dollar falling against foreign currency and companies downsizing or shutting down altogether to cause high rates of unemployment, these factors become a perfect economic storm that has been dubbed a recession, although many call it the beginning of a depression. There have been signs in the past few months that indicate that the world economy is pulling out of this slump, but progress is slow and many are discouraged.
Home mortgages have been defaulting in record numbers, although the number is hard to pinpoint due to the fact that many lenders do not publish the full date. The most recent statistics for the entire country were that in 2005 there were approximately 100,000 home repossessions, contrasted against 2010’s report, where more than a million homes were repossessed. GMAC foreclosures alone have been in the millions since the recession began in 2007. GMAC Mortgage, combined with the others in the Big Three of lending, have recently fallen under suspicion by the federal government and consumer protection organizations, who point out that the sheer number of foreclosures and the rapidity with which the banks act to foreclose is suspicious. GMAC and Bank of America have both been censured by federal regulators, who had found proof that these banks have used dishonest business practices to speed through foreclosure paperwork, even skipping notary procedures, in order to foreclose on the homes faster. Often, the bank will assemble a group of mortgages together into a bundle, called a portfolio, to sell wholesale to a secondary company, taking a hit on the original prices of the mortgage but relieved to get these assets off their books. Many times, the secondary purchaser has gone to complete foreclosure on these bundled properties and discovered that they lacked proof that due diligence was performed, often crucial paperwork was missing, and that they could not legally proceed with the foreclosure. GMAC foreclosures were ordered to be halted temporarily in 23 states in October of 2010, as federal and state authorities looked into GMAC and the other banks’ foreclosure practices.