GMAC Mortgage, part of the home lending unit owned by Ally Financial Inc. (ALLY), will pay $230 million to compensate borrowers for improper handling of foreclosures, the Federal Reserve said today in a statement.
GMAC Mortgage will pay about 232,000 borrowers to settle claims it improperly seized homes, the Fed said. In a deal similar to those regulators struck with 13 other mortgage servicers this year, the money goes to borrowers who faced foreclosure in 2009 and 2010.
Settlements reached since January with 14 of the largest U.S. mortgage servicers, total more than $3.8 billion, will close the books on mishandled foreclosures after the 2008 credit crisis. GMAC Mortgage’s deal -- approved by the court overseeing the bankruptcy -- ends a process the company agreed to in 2011 to have individual foreclosures reviewed for harm.
“We’re relieved to be able to distribute these funds directly to borrowers rather than spend the time and money with consultants to complete the file review,” Tammy Hamzehpour, a spokeswoman for Residential Capital -- part of the Ally mortgage unit placed into bankruptcy last year -- said in an e-mailed statement. “That process would not have returned anywhere near as much money, to as many potentially harmed borrowers, as will this settlement.”
The company settled without admitting or denying wrongdoing. The payments will come from the Residential Capital estate, Hamzehpour said.
Ally, formerly known as GMAC Inc., was owned by General Motors (GM) Corp. until 2006, when the automaker sold 51 percent to private-equity firm Cerberus Capital Management LP. The U.S. took a 74 percent stake in 2008 in return for financial aid that kept the lender from collapsing under bad loans.
Mortgage servicers including JPMorgan Chase & Co. (JPM), Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley (MS) were accused of engaging in improper foreclosure methods in 2009 and 2010, including so-called robo-signing of documents. Most of their settlement money has already been sent to borrowers in checks ranging from $300 to about $125,000. The Fed didn’t release details of Ally’s payment plan.