Lender stops some evictions, foreclosed home sales
The process of buying an REO or real estate owned property -- a house owned by the lender, such as a bank -- can be a long complicated process. Credit: Getty Images
GMAC Mortgage said Monday it halted certain evictions and sales of foreclosed homes in New York and 22 other states as it corrects "a potential issue" in its foreclosure process.
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 marked "urgent," Bloomberg News reported. James Olecki, spokesman for Ally Financial Inc., which owns GMAC, confirmed the memo's contents.
Brokers were told to immediately stop evictions, cash-for-key transactions and lockouts, according to the memo, sent to GMAC preferred agents.
The action highlights what is becoming a larger problem for lenders and servicers that may have illegally driven homeowners out of their houses. The issue is threatening to further clog an already overloaded foreclosure process.
Lenders took back more homes in August than in any month since the start of the U.S. mortgage crisis, foreclosure listing firm RealtyTrac Inc. said last week. Banks have been stepping up repossessions to clear out their backlog of bad loans.
GMAC did not identify the internal issue that prompted the moratorium in its statement, or say how many homeowners would be affected, but it has been linked to lawsuits surrounding the alleged falsification of a key foreclosure document.
The Florida attorney general is investigating three law firms for allegedly providing fraudulent affidavits that identify who holds the original mortgage note in foreclosure cases.
In Florida and other states, this document allows lenders to bypass a costly trial and proceed with a foreclosure.
Two of the three firms being investigated have represented GMAC in foreclosure proceedings. And the person who signed many of these allegedly false affidavits was an employee of GMAC.
GMAC said it expects the issues to be resolved within a few weeks or by year-end.
