Turn On The Lights, Watch The Roaches Scatter, Part 10

Damn but this story is moving like a hurricane now.  Ohio AG Richard Cordray is suing GMAC/Ally Bank for filing false affidavits on foreclosure paperwork.  That's fraud, people.  Dave Dayen rolls out the news:

This is big news. I just got off a conference call with Richard Cordray, the Attorney General for the state of Ohio. He has filed a lawsuit in Lucas County (Toledo) Common Pleas Court against GMAC Mortgage and their parent company Ally Financial, in a suit which names Jeffrey Stephan, the infamous “robo-signer” who signed off on up to 10,000 foreclosures a month across the country with affidavits, without verifying the information in the foreclosure documents. The lawsuit alleges fraud on the part of GMAC, along with violations of the Ohio Consumer Sales Practices Act, in filing false affidavits to mislead the courts in what they describe as “hundreds” of Ohio foreclosure cases. And, the Attorney General is treating every single false affidavit filed in an Ohio court as a separate violation, with a fine of up to $25,000, plus additional restitution for the homeowner of an unspecified amount.

Ka-CHING!  I think the Buckeye State may have found a way to resolve its budget problems.

This is a major lawsuit, and as Cordray told reporters, “We’re at the beginning of this, not the middle or end, and we’ll see where it leads us.” For context, approximately 450,000 foreclosures have been filed in Ohio since 2005, and potentially all of them used this robo-signing process. At the outer edge of this, if every one of those foreclosure processes is seen as a single case of fraud, the fines for the entire lending industry would add up to $11.25 BILLION dollars, just in the state of Ohio, not including the extra restitution for homeowners.
 
I don’t think that’s necessarily going to be the end result of this, but for the moment, Cordray is suing GMAC, and all he has to prove is that the lender knowingly presented false affidavits and false documents to the court. Even the hundreds of cases he suggested GMAC committed fraud in would amount to a significant fine.

What’s more, Cordray sent letters seeking meetings with the other four top lenders in the state – Bank of America, JPMorgan Chase, Citi and Wells Fargo – to discuss their use of robo-signers and how they plan to remedy the practice. He certainly sounded like someone ready to include them in future lawsuits.

Oh my.   And this is just one state that could collect $11 billion in fines from the mortgage mills.  Imagine what every other state in the nation suddenly got the brilliant idea to try this?  And this doesn't include the civil lawsuits brought by the homeowners, either.

Are we finally getting a rough picture of just how huge of a nightmare this is going to be for the banks, and why halting foreclosures nationwide is all but inevitable here soon?  Delaware has joined the chorus of states asking for a foreclosure freeze as well.

We're starting to get into the big bucks and the big lawsuits here.  Stay tuned.  This one's beginning to really ramp up speed.