A landmark legal case that spotlighted mishandled foreclosures by some of the country’s major lenders is likely to come before Maine’s highest court in September.

The Maine Supreme Judicial Court is expected to hear an appeal of a lower court ruling involving the mortgage servicer GMAC and its foreclosure practices.

In September 2010, a Maine District Court judge found that a GMAC official had signed a sworn statement supporting the foreclosure of a home owned by Nicolle Bradbury of Denmark, who had lost her job and stopped making mortgage payments. The official, however, hadn’t actually reviewed Bradbury’s foreclosure documents before signing.

The flawed paperwork was uncovered by Thomas Cox, a lawyer in South Portland. It turned out to be part of a pattern in which thousands of foreclosures were approved by overwhelmed employees who didn’t take time to read all of the documents.

The revelation led last year to a temporary freeze on foreclosures by GMAC and other big lenders. It also prompted state attorneys general to seek a settlement with the nation’s largest banks, and prompted a class-action lawsuit in Maine. Both efforts continue.

In Bradbury’s case, the judge ordered the mortgage financier, Fannie Mae, to pay some of Bradbury’s legal fees, but stopped short of penalizing GMAC. In the appeal, Cox plans to argue that the District Court should have sanctioned the bank for acting in bad faith.

GMAC has foreclosed on 1,050 homes in Maine in the past six years, Cox said. Bradbury still lives in her home and isn’t paying a mortgage while the legal fight moves forward, Cox said.

GMAC is now part of Ally Financial Inc. The company declined to comment on the cases Tuesday.

The nation’s foreclosure crisis, a stubborn legacy of the 2008 recession, continues to burden many homeowners.

The foreclosure tracking agency RealtyTrac reported this month that filings had fallen to their lowest level in nearly four years. That appeared to be good news.

But the slowdown, RealtyTrac said, wasn’t a sign of an improving real estate market. Instead, banks were holding off on processing new foreclosures because weak demand made it hard to sell properties that already were on the market. High jobless rates and falling home values continue to dampen sales, it said.

RealtyTrac figures for Maine show a foreclosure rate that remains well below the national average — one in every 2,649 homes, compared with one in every 605. But distressed properties are much more common in pockets of the state. A consistent example is Sanford, where one in every 700 homes had a foreclosure-related filing in May.

Against that backdrop, the legal cases in Maine are drawing national interest and could have wider implications, according to Cox, who said a ruling that favors his client could set a precedent for other states.

“The remedies lie within state court systems,” he said.

Also expected to be heard by Maine’s highest court is a legal question surrounding the class-action lawsuit, said Andrea Bopp Stark, a lawyer representing the homeowners. The question is related to Maine’s unfair trade practices act, she said.

Last winter, a federal judge dismissed two other counts in the class action brought by Bopp Stark and Cox. The lawyers are seeking compensation and punitive damages for Bradbury and other Maine homeowners with GMAC foreclosures that weren’t processed in compliance with state law.

Bopp Stark, who has an office in Biddeford, said she had noticed a slight lull in foreclosure cases in recent months, but they appear to be picking up again.

“I think we’re going to see another flood of foreclosure filings,” she said.

 

Staff Writer Tux Turkel can be contacted at 791-6462 or at: tturkel@pressherald.com

 

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