GMAC Mortgage Faces Lawsuit for Failing to Properly Service Mortgages

Citing mismanaged loan servicing among other accusations, ""American Residential Equities, LLC"":http://www.arenow.com/english/index.html (ARE) has filed suit against ""GMAC Mortgage Corporation"":http://www.gmacmortgage.com/index.html, a big player in the residential mortgage servicing industry.

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The suit, filed in the Southern District of Florida, accuses GMAC of failing to properly service a number of mortgages and REO properties owned by Miami-based ARE. As a result of this mismanagement, ARE says it has been working for the past year to arrange an orderly transfer of the servicing responsibilities of its loans away from GMAC.

""In violation of our agreement, GMAC has systematically mismanaged hundreds of loans and properties in our portfolio,"" said Jeffrey Kirsch, president and CEO of ARE. ""Not only did they fail to complete the simplest activities required of all mortgages services companies, but they repeatedly disregarded our instructions, ignored our requests for reports, and jeopardized our assets.""

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In addition, ARE says GMAC refused requests to audit its books and records. The suit alleges that GMAC failed to maintain properties, subjecting them to weather damage, vandalism, and government fines. And in other cases, ARE says some properties were over-insured, while timely insurance claims were not filed for others.

ARE also claims in the suit that it was pressured by GMAC into offering preferential treatment and a loan modification to Georgia State Rep. Joe Heckstall's brother, Cornelius Heckstall.

According to the suit, Rep. Heckstall contacted GMAC on behalf of his brother and requested that his mortgage be modified a second time. ARE contents that GMAC pressured the company to offer this second mortgage modification, despite the fact that he had failed to make payments related to an earlier loan modification with identical terms.

""While GMAC repeatedly neglected the assets in our portfolio, they appeared to bend over backwards for Rep. Heckstall's brother,"" said Kirsch. ""We bowed to the pressure because it gave us more time to find a competent replacement servicing company.""

GMAC, though, vehemently denies these claims.

In a statement sent to DSNews.com, James Olecki, a spokesperson for GMAC, said, “We believe this suit is without merit and will vigorously defend against the allegations, including the pursuit of all outstanding claims against American Residential Equities.""