GMAC Mortgage, a unit of Ally Financial Inc., has halted evictions in 23 states as the result of mishandled affidavits. Company employees submitted affidavits containing information they didn’t personally know was true and signed the affidavits without a notary present. In fact, this is an industry-wide problem and there will be more said on that in the coming weeks.

State officials are investigating allegations of fraudulent foreclosures at the nation’s largest home lenders and loan servicers. Mortgage borrowers have accused GMAC and other lenders of foreclosing on homeowners without verifying that they own the loans. Companies commonly file affidavits to start court proceedings. GMAC has instructed brokers and agents to halt evictions tied to foreclosures on homeowners in 23 states. The company says it may have to take “corrective action,” whatever that means, on other foreclosures.

In December 2009, a GMAC Mortgage employee said in a deposition that his team of 13 people signed “a round number of 10,000” affidavits and other foreclosure documents a month without verifying their accuracy. The employee testified that he relied on law firms sending him the affidavits to verify their accuracy instead of checking them with GMAC’s records, which is required. The affidavits were then used to complete the process of repossessing homes and evicting residents.

The admissions by the GMAC employee, charged with reviewing 10,000 cases a month, could have an impact far beyond the 23 states where Ally has halted foreclosures. Ally isn’t the only lender whose employees failed to review foreclosure information before taking legal action. The overburdened foreclosure system in the U.S. is full of fake documents, forged signatures and lenders who take shortcuts reviewing borrower’s files. It’s time for the Justice Department to come in and put a stop to this type activity.

Sources: Bloomberg and Washington Post