Attorneys General in Connecticut, Illinois and Ohio have signaled their interest in looking into how large mortgage holders and servicers have been managing delinquent mortgages through foreclosure or modification.
The officials took steps after court filings and media accounts reported that both Ally Bank, formerly GMAC, and JPMorgan Chase both appeared to have skipped steps in the foreclosure process.
"I am demanding a freeze in all GMAC-Ally foreclosure actions to forestall horrendous, illegal harm against homeowners," Connecticut Attorney General Richard Blumenthal said. "The GMAC-Ally foreclosure steamroller should be stopped so the company can be held accountable. My office has already confirmed that some defective documents were filed in Connecticut. The bank's apparent failure to follow basic legal procedure-a potential fraud on the court-is appalling and unacceptable. Our investigation will enable strong legal action against GMAC-Ally, if warranted by the facts and the law. I will fight to assure that banks comply with clear legal requirements that protect homeowners from unfair foreclosures of their homes."
Blumenthal has given Ally until Oct. 15 to freeze all of its foreclosure processes in Connecticut, pending the outcome of the investigation.
"My office will investigate whether other banks engaged in such practices because these failings involve much more than mere technicalities, as GMAC-Ally has claimed," Blumenthal added. "As a consumer advocate and attorney, I am dismayed and shocked that the bank blatantly skirted legal requirements and procedural safeguards to increase the volume and pace of foreclosures."
"Families' homes are at stake here," wrote Illinois Attorney General Lisa Madigan in a letter to Ally. "If I determine that Ally is rubber-stamping affidavits and filing them with our courts as evidence, I will take appropriate action. The law demands that lenders prove their case in foreclosure actions, and Illinois homeowners demand the same."
"Many Ohioans are struggling to remain in their homes and are in absolutely desperate situations," said Ohio Attorney General Richard Cordray . "It is critical that all involved in the foreclosure process recognize the dire circumstances of these Ohioans and protect the integrity of the system through careful vigilance. It is with this in mind that I request courts throughout the state to monitor these cases which may be the result of questionable practices."
Ally has suspended some foreclosure proceedings in a number of states but has declined to address the question of its procedures directly.
"We are unable to comment on the specific merits of the challenge because some of them are in litigation," Ally said in a statement. "Nevertheless, a new process has already been developed and implemented so that though some existing foreclosures may experience delays while corrective action is taken, there will be no interruption in new foreclosures."