U.S. foreclosure filings plunged in late 2010 after attorneys general in all 50 states started investigating allegations of faulty and fraudulent paperwork used to repossess homes. The country's biggest banks, including JPMorgan Chase & Co. and Bank of America Corp., agreed to a $25 billion settlement in February.
In New Jersey, where about 60,000 foreclosures started since January 2008 still await resolution, borrowers in the foreclosure process haven't made a payment for an average of 934 days, according to Lender Processing Services Inc. New York, at 953 days, and Florida, at 938 days, are the only states with longer time frames. The U.S. average is 742 days.
New Jersey's foreclosure process ground almost to a halt in December 2010 after state courts threatened to suspend seizures by six of the largest banks unless they showed they had processes in place to ensure that information in uncontested foreclosures is based on a personal review of records. State Supreme Court Chief Justice Stuart Rabner said the lenders were implicated in "robo-signing," using assembly lines of workers to sign foreclosure documents without verifying them.
Robo-Signing Scandal
The Bradys were among those caught up in the scandal. In September 2006, they took out a $485,000 loan from a division of General Motors Acceptance Corp. on their home, which has an assessed value of $650,000, according to public records. The debt paid for home improvements and medical bills for their daughter, Karen Quinlan, Margret Brady said. They missed a payment in November 2008, the month after their daughter died of cancer, Brady said.
"We used her life insurance to catch up, which was $10,000," she said. "We thought we were even, but they kept putting on these bogus charges."
Susan Fitzpatrick, a spokeswoman for Residential Capital LLC, the parent of GMAC Mortgage, declined to discuss a specific borrower, citing privacy reasons.
GMAC Restarts
GMAC Mortgage has restarted foreclosures on delinquent properties in New Jersey, Fitzpatrick said in an e-mail. "Although foreclosure delays have allowed delinquent borrowers to remain in the home without payment for a longer than normal period of time, they do not increase the likelihood a servicer can provide sustainable and affordable alternatives to foreclosure, such as loan modifications or short sales."
For more than a year, the Bradys tried to negotiate a loan modification, putting aside $2,000 a month into a special bank account rather than paying the lender.