GMAC Announces It Will Stop Most Massachusetts Mortgage Lending After Foreclosure Suit
NEW YORK -- One day after it was among five major banks sued by Massachusetts over deceptive foreclosure practices, GMAC Mortgage said Friday that it will stop purchasing new mortgage loans written by third parties in the state.
The mortgage origination and servicing arm of Ally Financial Inc. said it will honor all commitments with correspondent lenders and wholesale brokers through Monday. The bank, formerly known as General Motors Acceptance Corp., is 74 percent owned by the U.S. government,
GMAC Mortgage will continue to lend directly to homeowners in Massachusetts.
A spokeswoman said most of its business in the state is done through third parties like community banks, which originate loans and sell them to GMAC.
GMAC then handles the loan servicing, or collecting homeowner payments.
The spokeswoman could not provide a breakdown specifically for Massachusetts, but said the correspondent and brokerage business represents 84 percent of GMAC Mortgage business nationwide.
Industry figures show GMAC was the fourth largest mortgage lender in the state in the third quarter.
In a statement GMAC said it "has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable."
Massachusetts Attorney General Martha Coakley said in a statement that GMAC has to follow the law before foreclosing on homeowners in order to do business in the state. "With today's action, it appears GMAC has acknowledged it has a problem following those laws and being held accountable for doing so."
The suit filed Thursday by Coakley claims GMAC and other banks violated Massachusetts law with "unlawful and deceptive" conduct, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications.
Robo-signing involves a bank official signing numerous documents without verifying the information they contain.
The lawsuit also named Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and Citigroup Inc., along with Mortgage Electronic Registration System, Inc. and its parent company as defendants. The company, a mortgage registry database, has been accused of shoddy record-keeping in large numbers of foreclosure proceedings.
The lawsuit was filed as talks have been dragging on for more than a year between major banks and the attorneys general from all 50 states over fraudulent foreclosure practices that drove millions of Americans from their homes after the housing bubble burst.
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By EILEEN AJ CONNELLY 12/ 2/11 04:44 PM ET Associated Press