Foreclosure Defense Florida

The GMAC / Residential Capital Bankruptcy…What's A Quarter Billion Dollars Between Friends?



A man’s usefulness depends upon his living up to his ideals insofar as he can.

It is hard to fail, but it is worse never to have tried to succeed.

All daring and courage, all iron endurance of misfortune-make for a finer, nobler type of manhood.

Only those are fit to live who do not fear to die and none are fit to die who have shrunk from the joy of life and the duty of life.

Theodore Roosevelt

Sitting in a room full of a hundred Wall Street lawyers”¦ I figure the average in the room was close to $500/hour.   With a hundred lawyers packed into the courtroom, that’s a whopping whole lot of money being spent every single hour picking over the carcass that is the GMAC/Residential Capital bankruptcy .   When you sit in a room like this, you can almost hear the billable hours clock whirring along at frenetic speed, the hands on that combined clock spinning furiously, the cumulative dollars spent number clicking higher and higher every single second.
First up on the agenda in this standing room only courthouse wedged in just a few hundred yards away from the Wall Street Bull was how the roughly quarter of a billion dollars in fees were going to be paid to PriceWaterHouseCooper.   That’s right, I said Billion with a B.   A big B. Another whirring clock of time and money that spins away feverishly.   Remember what happened here”¦.the big banks”¦nearly all of them got caught lying, cheating and stealing from the Federal Government, from their own investors, from the American People.   That’s the conduct that’s identified so clearly in the 49 State Attorney General Sellout, in the investor lawsuits and in the myriad regulatory actions that are pending or have been quietly closed against the banks.   And the outcome of all those investigations?   Armies of lawyers and accountants and experts, billing away at millions of dollars a day to analyze, quantify, chart and graph an entire financial system predicated on lies and fraud and cheating and abuse.

As of the Petition Date, the Debtors estimated that the performance of this review

may cost as much as $180 million. Whitlinger Affidavit ¶ 87. However, the Debtors now

believe compliance could cost substantially more, perhaps reaching $250 million. Pensabene

Declaration ¶ 9. As discussed further below, compliance with the FRB Consent Order is

necessary to the smooth operation and continued viability of the Debtors’ businesses and,

accordingly, the Debtors intend to comply with the FRB Consent Order to the best of their


In the Whitlinger Affidavit, the Debtors disclosed that they estimated that the cost

of the FRB Foreclosure Review could reach approximately $180 million, although based on

subsequent events, it has become apparent that the costs of compliance with the FRB Foreclosure

Review could increase well above that amount, perhaps reaching $250 million. Whitlinger

Affidavit ¶ 87; see Pensabene Declaration ¶ 9. During the ninety day period from January 12,

2012 through the Petition Date, PwC received approximately $38,442,537 from the Debtors as

compensation for services related to the FRB Foreclosure Review, including a $10,000,000



It really was quite amazing to sit there in this courtroom, a room full of very, very bright people most quite nonplussed by the very big numbers,   real numbers that represent real money that are so big they have to be printed on paper longways. I suppose that after years embedded in such an environment it is possible to lose sight of the fact that this was, at some point in time, real money being talked about here.   That quarter of a billion dollars that PriceWaterHouseCoopers will be paid represents decades and decades of the salaries of the cops and teachers and retirees who were paying GMAC mortgages for decades and decades.   And one thing that’s clearly missed by all the Big Boys and Girls in Wall Street Blue Suits is the fact that all of this”¦the entire exercise of picking over the carcass that is the GMAC/Rescap bankruptcy”¦is being paid for by the mortgage payments that were and are still being sent in by Americans from Florida all the way across to California and everywhere in between.   In my mind, these people are the most important stakeholders in the entire case, but right now they have no voice.
And so it was into this milieu that a small group of consumer lawyers and even a few consumers themselves dared to enter, a few rebels that sneaked onboard the Millennium Falcon, hiding in the trash compactor as the storm troopers dressed in gleaming white go marching past.   The message we sought to deliver was that The People”¦All of The People”¦who are funding this exercise deserve to have their voices heard and specifically that a formal committee should be appointed within the GMAC Bankruptcy case to represent the interests of the millions of homeowners who are in bankruptcy, who are in foreclosure or whose mortgages are serviced by GMAC.
And given the extraordinary government sponsored involvement in the GMAC enterprise”¦an involvement supercharged with the ownership stakes that Fannie Mae, Freddie Mac and Ginnie Mae hold in the mortgages serviced by GMAC”¦ this formal plea for a seat at the table is even more justified and relevant.   The banks and investment groups and the teams of attorneys and consultants are not the only stakeholders in the banks that have wrought such havoc across this country.   In fact, The People who are paying for all of this”¦and who will be paying for it for the rest of their lives are essential”¦.but forgotten”¦stakeholders.
Understand clearly what occurred here with the banks that were the subject of the 49 state AG sellout”¦read especially the HUD/Office of Inspector General Audit Summary of GMAC/Ally.   GMAC/Residential Capital made billions of dollars originating mortgages from Sea to Shining Sea.   But GMAC didn’t just use their own money.     GMAC was a Direct Endorsement Lender which means they had ready access to a nearly unlimited source of taxpayer dollars to fund these mortgages.   And for every mortgage funded, GMAC took a fee.   GMAC collected the payments on those mortgages”¦and for that they took a fee.   When a loan went into bankruptcy or foreclosure, GMAC took a fee.   And when GMAC concluded a foreclosure on a government insured loan, they filed an insurance claim with the Federal government.  And, according to the Feds, many of these claims were False Claims”¦that assertion comes directly from the GMAC/OIG Audit report.   A report that not nearly enough Americans read.   Perhaps the most significant aspect of the report is the entire section devoted to the assertion that the Office of Inspector General was ” significantly hindered” from engaging in a full investigation because GMAC prevented employees from being interviewed.   Like I said, not nearly enough people in this country have read that report and fewer have considered the implications for all of us.
What is clear from all of this is that GMAC (along with the other bank servicers who act as debt collectors for the federal government and investors) were being paid AT EVERY SINGLE STAGE OF THE PROCESS. At origination, at servicing, in foreclosure, in bankruptcy, in REO.   They were paid money in various forms from the federal government and they are paid money from the millions of homeowners who write mortgage payment checks each month.   In the boom times, they all shoveled billions of dollars into their bottom lines.   And even now, in post crash, the banks continue to suction billions into their corporate coffers, devoting millions here and there for teams of attorneys, consultants, experts and board members.
And now, while GMAC is in the middle of a long”¦and very costly bankruptcy”¦(remember the bills from PriceWaterHouseCooper that are burning away at millions of dollars every month?)”¦the investors and the private equity firms are all lined up to take their million or hundred million dollar place in the line”¦a line funded by the millions of Americans who have paid”¦and continue to pay”¦GMAC mortgages.   It’s a hundreds of millions of dollars line that’s additionally underwritten and paid for by each and every Amerikan taxpayer in the form of subsidies and tax breaks and bailout dollars.
Oh, much time was spent during Thursday’s hearing addressing and explaining the various aspects of the obligations that have been imposed on GMAC as a direct result of being caught doing all kinds of really bad things”¦but not nearly enough attention was paid to the fact that it’s the millions of everyday Americans that are paying for all of this.   They’re paying for the lawyers and the accountants and the analysysts and experts
It remains to be seen whether a formal Borrower’s Committee will be seated as part of the GMAC Bankruptcy. I will say that the judge who is hearing this case appears very much to understand the dynamics of all these issues.   It was frankly most impressive to see his thoughtful and deliberative treatment of a motion filed by a pro se litigant from Alabama.   She wasn’t there in the courtroom, and probably didn’t know that she could appear by telephone, but in that packed courtroom in lower Manhattan, the awesome power of the federal court”¦embodied in one bankruptcy judge”¦ took the time and energy to give her motion full attention.   Just imagine that”¦a room full of lawyers and quarter billion dollar bills on the table and the judge takes all that time that’s necessary to make sure every single claim and motion is heard”¦it really was something to behold”¦
And while It’s not at all certain whether the American taxpayer and the clients of GMAC will have their voice in the midst of all of this”¦it is indeed unclear whether the court will appoint a Borrower’s Committee”¦it is absolutely certain that the attorneys and the analysts and the accountants will continue to burn away millions of dollars at a most frenetic pace”¦bills that will be paid for by normal, everyday Americans.   Now they might not get their modification approved and they might not have short sales approved and other relief might be denied”¦.but the big bills submitted by those at the top of the pyramid will most assuredly get paid.
Keep paying your mortgages, Amerikans”¦.there are rooms full of lawyers and accountants all across this country that need your mortgage payments”¦

One Comment

  • Iso Gradjan says:

    Thanks for the info. I am one of GMAC “still up to date payers”. What does this bankruptcy mean for me ? DO you know who is in possession of the title of my house ? What happen if I stop making payments ? Can Residential Capital (in process of bankruptcy) still take me into foreclosure ?
    Greatly appreciated,
    Iso Gradjan

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