Ally Financial extends foreclosure review to 50 states
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Ally Financial Inc. said Tuesday that it would expand the review of its foreclosure practices nationally to include so-called non-judicial states such as California where courts do not hold jurisdiction over the process.
The company stopped short of saying it would suspend foreclosure sales in all 50 states, as Bank of America did last week, while it conducted this review.
Ally (formerly GMAC) was the first big mortgage servicer to begin the suspension of evictions and foreclosure sales in the 23 judicial foreclosure states after it found that its employees signed thousands of legal affidavits assuring judges of facts regarding defaulted loans -- without reading the documents.
The bank, and representatives of the mortgage banking industry, have described the problems as procedural, saying the foreclosures were justified even if the paperwork was botched. Several other major lenders have followed suit in their suspension of foreclosures in the judicial states –- including J.P. Morgan Chase and Bank of America -- saying they are suspending foreclosure sales or reviewing their practices in those 23 states.
Jim Olecki, a spokesman for Ally, said on Tuesday that the company was hiring several legal and accounting firms to conduct independent reviews of its process nationally out of “an abundance of caution.”
The action comes on the same day that a spokesman for California Atty. Gen. Jerry Brown said California would join a multistate investigation of whether banks violated laws by cutting corners while foreclosing on homes.
The task force is headed by Iowa Atty. Gen. Tom Miller, who, as reported in the L.A. Times, has taken the lead in previous mortgage-related probes conducted by coalitions of state officials.
Olecki, the Ally spokesman, cited a desire to ensure that the company was complying with local laws as a reason for the review.
“We took this step to just make sure that everything is aligned in all 50 states, that we are complying with local laws and that everything is buttoned up,” Olecki said. He declined, however, to say whether the company would suspend foreclosure sales and evictions in states such as California if it did find systematic improprieties.
“We haven’t found anything else in the other states,” he said, adding, “I don’t think I can comment on that because it is speculative.”
Neal Dudovitz, executive director of Neighborhood Legal Services of Los Angeles County, told The Times on Monday that he suspected that the foreclosure laws might have been violated in California.
His organization has seen an increasing number of California borrowers foreclosed upon even as their lenders continued to accept payments on a trial loan modification. In some cases, he said, his group has been successful in getting foreclosure sales rescinded, he said.
-- Alejandro Lazo