GMAC Calls Off Foreclosure Actions, Suspends Pending REO Sales In 23 States, Letting Buyers Back Out Of Deals; Cites Need To Take "Corrective Action"

Bloomberg News reports:

• Ally Financial Inc.’s GMAC Mortgage unit told brokers and agents to halt foreclosures on homeowners in 23 states including Florida, Connecticut and New York.(1)(2)

• 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 and obtained by Bloomberg News.

• Ally Financial spokesman James Olecki confirmed the contents of the memo. Brokers were told to stop evictions, cash-for-key transactions and lockouts, regardless of occupant type, with immediate effect, according to the document, addressed to GMAC preferred agents.

• The company will also suspend sales of properties on which it has already foreclosed. The letter tells brokers to notify buyers that the company will extend the closing date on all sales by 30 days. Buyers will be able to cancel their agreement to purchase and get their deposit back, according to the letter.

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• Lawyers defending mortgage borrowers have accused GMAC and other lenders of foreclosing on homeowners without verifying that they own the loans. In foreclosure cases, companies commonly file affidavits to start court proceedings. “All the banks are the same, GMAC is the only one who’s gotten caught,” said Patricia Parker, an attorney at Jacksonville, Florida-based law firm, Parker & DuFresne. “This could be huge.”

For the stories, see

• Ally's GMAC Mortgage Halts Home Evictions in 23 States,
• Ally Says GMAC Mortgage Mishandled Affidavits on Foreclosures.

For story update, see: GMAC Denies Halting Foreclosures in 23 States:

• There has been a number of reports from other media outlets that the suspensions may relate to how GMAC documented ownership of the mortgage note in foreclosure claims in some states. The Associated Press reports that Jeffrey Stephan, a GMAC employee, testified in December that he routinely signed 10,000 such affidavits or claims a month without verifying who actually owned the mortgage.

• An examination of the states listed in the Bloomberg report by the Naked Capitalism blog found that 22 of the 23 are judicial foreclosure states, which require such affidavits in order to bypass lengthy judicial hearings. In addition, the Bloomberg list covers all but one of the nation’s judicial foreclosure states. Regardless of whatever procedure GMAC is alluding to in its statement, the question of proving ownership of a mortgage in foreclosure cases has been a growing issue.

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• The Florida attorney general is presently investigating three law firms for providing fraudulent affidavits of mortgage ownership, two of which have represented GMAC in foreclosure proceedings. U.S. Rep. Alan Grayson (D-Fla. 8th), cited the cases in a letter [] asking the Florida Supreme Court Chief Justice Charles Canady to suspend all mortgages until the investigation is completed.

(1) 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, Wisconsin.

(2) According to a recent New York Times story (see GMAC Halts Foreclosures in 23 States for Review):

• Since the real estate collapse began, lawyers for homeowners have sparred with lenders in those states. The lawyers say that in many cases, the lenders are not in possession of the original promissory note, which is necessary for a foreclosure. GMAC, which has been the recipient of billions of dollars of government aid, declined to provide any details or answer questions, but its actions suggest that it is concerned about potential liability in evicting families and selling houses to which it does not have clear title.

• The lender said it was also reviewing completed foreclosures where the same unnamed procedure might have been used. Matthew Weidner, a real estate lawyer in St. Petersburg, Fla., said he interpreted the lender’s actions as saying, “We have real liability here.” Mr. Weidner said he recently received notices from the opposing counsel in two GMAC foreclosure cases that it was withdrawing an affidavit. In both cases, the document was signed by a GMAC executive who said in a deposition last year that he had routinely signed thousands of affidavits without verifying the mortgage holder. “The Florida rules of civil procedure are explicit,” Mr. Weidner said. “If you enter an affidavit, it must be based on personal knowledge.” The law firm seeking to withdraw the affidavits is Florida Default Law Group, which is based in Tampa.