Turn On The Lights, Watch The Roaches Scatter Part 48

At least one district judge is siding with the banks in Foreclosuregate, but only because the judge believes state courts have the authority to stop fraudulent foreclosures, not federal ones.

GMAC Mortgage LLC, after defeating a bid by homeowners in Maine who sought a federal court order blocking sales and evictions, can sell foreclosed homes in the state.

U.S. District Judge D. Brock Hornby, at a hearing yesterday in Portland, Maine, declined to grant a temporary restraining order that a plaintiff’s lawyer said would have kept GMAC from selling foreclosed homes and evicting residents.

The judge said his decision hinged on the power of federal courts to stop proceedings in state courts, where foreclosures take place. He said individual homeowners who face losing their homes in a foreclosure sale can go to state court to stop the sales, he said.

“This decision is based on the limited authority federal courts have,” Hornby said.

The Maine case, filed in state court in October and moved to federal court by GMAC in November, involves five homeowners who are suing GMAC, claiming the company relied on defective court documents in seizing homes. The plaintiffs are seeking to represent Maine homeowners who are facing foreclosure by GMAC or who lost their homes in a GMAC foreclosure during the past six years and whose case relied on false documents, according to court documents.

GMAC had agreed to suspend foreclosure sales and evictions in the state until the judge ruled on the request for the restraining order, Andrea Bopp Stark, a lawyer for the plaintiffs said. That agreement expires yesterday.

In other words, GMAC moved the case to federal court because they knew they would win, but the decision means these individual homeowners have to go to state court now to stop each foreclosure separately.  That's going to be a logistical nightmare, and everyone knows it.

I wouldn't expect GMAC to restart foreclosures right before Christmas in Maine, but we'll see.