Dubious Docs Begin Surfacing In Ally/GMAC's 27 Non-Foreclosure Moratorium States, Leaving Homeowners Across Country Scrambling To Challenge F'closures

The Washington Post reports:

• Flawed foreclosure documents like those that led mortgage lender Ally Financial [the outfit formerly known as GMAC] to halt evictions in 23 states this week are showing up in parts of the country previously thought to be unaffected, including the Washington area, according to attorneys and consumer advocates.

• Ally Financial has not called off evictions in the other 27 states or the District of Columbia, none of which require a court order to initiate a foreclosure. And yet in those places, distressed borrowers, on the brink of losing their homes, are finding flawed and forged documents in their files and scrambling to challenge foreclosure proceedings.

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• In Maryland, Virginia, the District and 25 other states in which lenders do not need a court order, homeowners challenging foreclosure proceedings face an uphill battle. In those places, a bank needs only to file papers with a local court official after giving a borrower sufficient notice. It's up to the homeowner to sue the lender to stop the process.

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• Generally speaking, delinquent borrowers have a better chance of keeping their homes in judicial foreclosure states because of the involvement of judges who appear to have wide discretion over how to handle shoddy or forged foreclosure papers. The system in the other states creates "enormous barriers for homeowners who want to assert legal claims and raise a defense," a report from the National Consumer Law Center concluded.(1)

For more, see Ally's mortgage documentation problems could extend beyond 23 states.

(1) See Foreclosing A Dream: State Laws Deprive Homeowners of Basic Protections (page 4).