California Attorney General Edmund G. Brown Jr.has directed Ally Financial Inc., formerly known as GMAC, to prove immediately that it is complying with state law or, if it cannot, to cease and desist from foreclosing on California homes. "I'm taking this action to protect California homeowners facing the tragedy of foreclosure," AG Brown said. "They are clearly in jeopardy since an Ally Financial official admitted his review of thousands of critical foreclosure documents was really a sham. Prior to resuming foreclosures here, the company must prove that it's following the letter of the law."
California law prohibits lenders from recording notices of default on mortgages made between Jan. 1, 2003 and Dec. 31, 2007, unless, subject to limited exceptions, the lender contacts or tries diligently to contact the borrower to determine eligibility for a loan modification. A notice of default must include a declaration of compliance with California law.
Recent reports have indicated that the head of Ally Financial's document processing team testified he routinely approved and signed foreclosure documents without confirming they were accurate and legally sufficient, as he was required to do. He approved foreclosure cases at such a rapid rate that he was known by consumer advocates as the "robo-signer."
This admitted misconduct raises serious doubts about whether Ally Financial's practices provide California borrowers facing foreclosure the protections guaranteed by law. Accordingly, Brown is demanding that Ally Financial, the fourth largest home loan institution in the country, demonstrate its compliance with California law or else halt all foreclosure operations in the state.
Ally Financial earlier this week suspended evictions of homeowners and foreclosure sales in 23 states that, unlike California, have a system that requires a court order for foreclosure. The company has, however, continued its foreclosure operations here and in other states.
In the first six months of 2010, Ally Financial originated $26 billion in home loans, with more than 24 percent of them made in California, and the company reported earnings of $769 million during that period from its large loan-servicing business. Ally Financial services loans on behalf of numerous other companies and investors.
Click below for a copy of the letter to Ally Financial from AG Brown.
For more information, visit www.ag.ca.gov.