Sunday, September 26, 2010

MORTGAGE & FINANCE: GMAC Mortgage halts evictions

Foreclosures in 23 states affected

Ally Financial Inc.’s GMAC Mortgage unit has told brokers and agents to halt evictions tied to foreclosures on homeowners in 23 states including Connecticut, Maine, and Vermont.

GMAC Mortgage may “need to take corrective action in connection with some foreclosures’’ in the affected states, according to a two-page memo dated Sept. 17 marked “urgent.’’ Ally Financial spokesman James Olecki confirmed the contents of the memo. Brokers were told to immediately stop evictions, cash-for-key transactions, and lockouts, according to the document, addressed to GMAC preferred agents.

The suspensions will “allow time to address a potential issue that was raised in a number of existing foreclosures challenging the internal procedure we used for executing one or more judicially required forms,’’ Ally spokeswoman Gina Proia said yesterday in an e-mailed statement. Foreclosures won’t be suspended and will continue with “no interruption,’’ she said.

Lenders and lawmakers have been trying to slow foreclosures and keep people in their homes as seizures set records. Bank repossessions climbed 25 percent in August from a year earlier to 95,364, according to RealtyTrac Inc., the Irvine, Calif.-based data provider. Detroit-based Ally, the auto and home lender formerly known as GMAC Inc., is 56.3 percent owned by the government after more than $17 billion of taxpayer bailouts.

The company has been working on the issue for “more than three months’’ and expects it to be resolved “within the next few weeks,’’ Proia said. She declined to provide further details, saying some of the cases are in litigation.

Suspensions will occur “where the related foreclosure could have been impacted by the same internal procedure. We are also reviewing certain previously completed foreclosures where the same procedure may have been used,’’ Proia said. The lender will suspend sales of bank-owned properties and extend closings 30 days. Buyers will be able to cancel any agreements to purchase and get their deposits back, according to the memo.

Barclays Capital analysts told clients in a note yesterday the action may involve issues with officials in so-called judicial states where lenders must appear before a judge before starting foreclosure proceedings. The moratorium may be an attempt “to ensure that the process does not have significant flaws that can leave it open to legal action in the future,’’ the analysts said.

Florida Attorney General William McCollum in August announced an investigation into three law firms that represent loan servicers in foreclosures. McCollum issued subpoenas to the firms, which are alleged to have submitted fraudulent documents to the courts in “numerous occasions’’ or failed to submit documents at all, according to an Aug. 10 statement from McCollum’s office.

The affected states are: 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, and Wisconsin.

Denise Pellegrini and Dakin Campbell Bloomberg News September 21, 2010

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