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Ally's GMAC mortgage unit temporarily halts evictions in 23 states

foreclosure.jpg
A foreclosed home in Miami, Fla. (Photo Credit: Joe Raedle/Getty Images)

Ally Financial, the troubled lender that received a massive federal bailout, has temporarily halted evictions on foreclosed homes in 23 states, a company spokesman said Monday.

The firm, once the financing arm of General Motors, said late Monday that the moratorium was due to "an important but technical defect" in the company's court filings for individual foreclosures.

Ally spokesman James Olecki said that in a number of cases the legal documents from the company's mortgage arm in support of the foreclosure proceedings "may have been executed without direct personal knowledge stated in the affidavit" and were not signed in the presence of a notary public.

But pro bono attorneys said the suspension of evictions came after their lawsuits filed against the company in Maine revealed that a single employee of Ally Financial may have approved tens of thousands of foreclosures across the country without reviewing the documents he was signing.

In a deposition, the employee stated that when he put his signature on case files, he did not know what information the file contained other than the borrower's name, that he did not inspect the exhibits he was supposed to, and that the notary who supposedly witnessed his signings was not in the room.

More: Full list of states affected

Thomas Cox, a lawyer in Portland, Maine, who took the deposition while representing homeowners, said in a phone interview that it's clear that this employee "doesn't know what he's talking about."

"We've established that in these foreclosures GMAC hasn't proven its case," Cox said.

Cox said the Maine attorney general's office is investigating the matter. The GMAC employee's name also came up in several mortgage foreclosure cases in Florida that are being disputed. The attorney general there is investigating at least four law firms that process foreclosures there, saying that they may be fabricating information or presenting misleading documents in cases.

Olecki declined to respond to specific questions on the pending litigation, but emphasized that the "sum and substance" of the company's foreclosure filings were correct. And an internal review has found that there were no "factual misstatements or inaccuracies" about the mortgage holders or the delinquency of their loans, he said. The vast majority of cases will be resolved in the next few weeks. Some, however, will require "court intervention," Olecki said.

He said that the suspensions will give the company time to review files across the 23 states, which span the country from New York to Florida and Hawaii. These states follow a judicial procedure that requires a court order to approve a foreclosure. A bank representative must sign off on the validity of a foreclosure filing after checking that the correct mortgage holder is named and that he or she is truly in default, among other things.

The U.S. Treasury Department, which owns a 56.3 percent stake in GMAC after bailing it out last year, was not involved in the decision, Olecki said.

Treasury officials declined to comment.

In an internal memo dated Sept. 17 and marked "urgent," brokers and agents of the company's GMAC mortgage unit were ordered to immediately halt evictions. Ally, the nation's fourth-largest home loan originator, may "need to take corrective action in connection with some foreclosures" in the affected states, the memo said.

Created in 1919 to finance GM auto sales, GMAC--as Ally was called back then--changed its focus during the housing boom and became one of the largest U.S. mortgage lenders. The company lost $13 billion from 2006 to 2009 as borrowers defaulted on those loans.

The government's $17 billion aid to the firm - which was the only bank to get three rounds of financing and is the only one in which the government owns a majority stake - has been criticized by members of a congressionally appointed panel tasked with overseeing the bailout.

The Obama administration has tried to tackle the foreclosure issue with various mortgage-relief programs, but those have not yielded significant progress.

Meanwhile, lenders like Ally have been trying to clear out a backlog of bad loans by repossessing homes but have had trouble selling them on the market.

The number of homes being repossessed by banks in August was the highest of any month since the start of the U.S. financial crisis, according to RealtyTrac. Lenders repossessed 95,364 properties in August, up 3 percent from July and 25 percent from August 2009.

The number of homes in any part of the foreclosure process - which includes default notices, scheduled auctions and bank repossessions - declined for the seventh month in a row.

The company, which renamed itself Ally earlier this year, spent $160,000 in the second quarter of this year to lobby Congress and the Federal Deposit Insurance Corp. on financial regulation, foreclosure prevention and other issues.

Here's the full list of states that are affected:

Connecticut
Florida
Hawaii
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Nebraska
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Pennsylvania
South Carolina
South Dakota
Vermont
Wisconsin

By Ariana Eunjung Cha  | September 20, 2010; 12:59 PM ET
Categories:  U.S. Economy  
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Next: Economic agenda: Tuesday, Sept. 21, 2010

Comments

Wow. I wonder what obstacles the other big retail banks will run into. I know in regards to some a California real estate loan, Wells Fargo is selling some notes to private label investors after the trial mods fall thru. This doesn't give the borrower time to apply for the new FHA underwater refi program. I can see some more lawsuits popping up as a result of banks unloading their assets to some aggressive investors who are putting the pins to the borrower to sell or else. Wonder what Wells Fargo is doing with their bailout funds while they are selling their notes to Guido?
californiarealestateloan

Posted by: Anonymous | September 20, 2010 7:49 PM | Report abuse

I had blogged on this but GMAC's newest press release shows that hey are recanting on this and that it is biz as usual... I blogged it on my zingervotes.blogspot after reading the press release and phoning and emailing the company.. It is disappointing that banks are not using legal means.. GMAC is not the only signature problems in documents that our pro se group has seen.

Posted by: alrady40 | September 21, 2010 1:27 AM | Report abuse

Are you looking to file for bankruptcy? Compare your bankruptcy options and information http://bit.ly/avB0jI

Posted by: jonseth21 | September 21, 2010 3:15 AM | Report abuse

Don't worry about it. The banks will find some way to dump the responsibility for their actions on someone else, even it it requires them to have a law passed by congress to relieve them of their liability.

Posted by: Anonymous | September 22, 2010 4:03 PM | Report abuse

Mr. President, why don't you address mortgage fraud which caused billions of dollors loss for the Americans? Why not hold Wells Fargo accountable for making mortgage loan based on hugely inflated appraisal?

How many jobs have to be created and how hard taxpayers have to work in order to fill up the deep hole mortgage fraud has created for the society? Bottom line, where is justice when the largest mortgage lender Wells Fargo is foreclosing home based on fraudulent loan and hugely
inflated appraisal. Isn't it prosecutable crime that majority of State Attorney General's offices are prosecuting?

Where is HOPE for homeowners? Is it too much to expect that Wells Fargo, the largest mortgage lender in US not to defraud homeowners like us by making fraudulent loan and foreclosing home based on hugely inflated appraisal?
www.wellsfargomortgagefraud.com

Posted by: Anonymous | September 23, 2010 12:38 AM | Report abuse

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