Ally Financial Asked to Halt Evictions in Colorado

Ally Financial Inc., the lender that stopped evictions in 23 states amid concern that its foreclosure process may be illegal, was asked by Colorado’s attorney general to extend the freeze by its GMAC Mortgage unit to his state.

In a letter dated yesterday, Attorney General John W. Suthers said he wanted to hear what new procedures GMAC has put in place to “ensure that fair and accurate representations are made when it pursues foreclosure actions.” He asked for a meeting between GMAC and members of his consumer protection staff.

GMAC Mortgage notified agents and brokers on Sept. 17 that it had suspended evictions in 23 states. Last week, Ally, the Detroit-based auto and home lender, said it found a “technical” deficiency in its foreclosure process allowing employees to sign documents without a notary present or with information they didn’t personally know was true. Colorado wasn’t one of the 23 states.

Attorneys general in at least five states including Texas and Florida are investigating GMAC mortgage practices and California has ordered the company to prove its foreclosures are legal or halt them. In North Carolina, the attorney general’s office has asked for a meeting with a GMAC Mortgage representative and more information from the company about its foreclosure practices.

Colorado Foreclosures

GMAC initiated more than 1,000 foreclosure actions in Colorado since January 1, Suthers, the attorney general, said in his letter. In most, if not all of these foreclosures, “local attorneys for GMAC represent in various required documents that GMAC Mortgage LLC is the ‘holder of the evidence of debt’ under Colorado law,” he said.

These lawyers made further representations about the unpaid loan balance, its delinquency and the validity of the note and deed of trust, he said. “While these are not sworn affidavits of the kind at issue in other states, the accuracy of these documents is essential for preserving the integrity of the foreclosure process in Colorado.”

North Carolina sent a similar letter to Ally yesterday. “The use of unverified affidavits to obtain judicial relief could constitute a fraud upon the court,” North Carolina Assistant Attorney General Philip Lehman wrote in a Sept. 27 letter to Ally General Counsel William B. Solomon Jr.

“A willful corporate pattern and practice of generating affidavits from employees who have no personal knowledge of the facts asserted could constitute unfair and deceptive practices,” he wrote. Lehman said he wants confirmation of the company’s moratorium on foreclosure-related evictions.

To contact the editors responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net; David E. Rovella at drovella@bloomberg.net.

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