Ally knew of faulty GMAC documents weeks before eviction moratorium
Ally Financial officials knew a large number of documents submitted in support of mortgage foreclosure proceedings were mishandled as early as August, but did not take action to stop the evictions until last week, according to a Bloomberg report.
Ally's GMAC mortgage unit briefed one of its customers, Freddie Mac, on Aug. 25 of the problem. Freddie Mac halted evictions on Sept. 1. But Ally did not take steps to freeze evictions and foreclosures until Sept. 17, the report said.
In addition to selling and servicing its own loans, Ally handles the management of mortgages for hundreds of other firms. Fannie Mae, the nation's largest government-backed mortgage firm, also uses Ally to service some of its loans.
The company has declined to comment on the timing or substance of conversations it had with Ally except to say that "we were first notified of the situation and the planned foreclosure freeze by GMAC and then we took the necessary steps to alert our networks of the need to adhere to that freeze."
It is the responsibility of servicers like Ally "to put processes in place that ensure they are fulfilling this requirement, and they are accountable for rectifying any issues that may arise in this regard, Fannie said.
Freddie Mac and Fannie Mae, which are managed by the government since a bailout in 2008, are responsible for guaranteeing or owning more than half the $11 trillion in U.S. home mortgages. The U.S. Treasury owns a majority-stake in Ally.
Correction: An earlier version of the headline for this post incorrectly stated that it took weeks for Freddie Mac to freeze evictions after learning the paperwork for those proceedings had been mishandled. In fact, their response took about a week.
Complete coverage in The Washington Post:
Sept. 20: Ally suspends evictions on foreclosed homes in 23 states
Sept. 21: A single Ally employee, Jeffrey Stephan, signed over 10,000 documents a month without reading them
Sept. 22: Fake documents, forged signatures plague foreclosure system
'Robo-signer' Linda Green's changing signature
Who is Jeffrey Stephan anyway?
Sept. 23: Mortgage documentation problems could affect other states not included in Ally's 23-state moratorium
Sept. 24: Lawmakers question Fannie on 'foreclosure mills'
Ariana Eunjung Cha
| September 24, 2010; 9:24 AM ET
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