Ally Financial, Incorporated Foreclosure and Claims Process Review
March 12, 2012
FOR: Charles S. Coulter, Deputy Assistant Secretary for Single Family Housing, HU
FROM: John P. Buck, Regional Inspector General for Audit, 3AGA
SUBJECT: Ally Financial, Incorporated Foreclosure and Claims Process ReviewFort Washington, PA
INTRODUCTION AND BACKGROUND
As part of the Office of the Inspector General’s (OIG) nationwide effort to review the foreclosure practices of the five largest Federal Housing Administration (FHA) mortgage servicers (Bank of America, Wells Fargo, CitiMortgage, JP Morgan Chase, and Ally Financial, Incorporated), we reviewed Ally Financial, Incorporated’s1 foreclosure and claims processes. In addition to this memorandum, OIG issued separate memorandums for each of the other four reviews.2 OIG also plans to issue a summary memorandum reporting the results of all five memorandums. We performed these reviews due to reported allegations made in the fall of 2010 that national mortgage servicers were engaged in widespread questionable foreclosure practices involving the use of foreclosure “mills” and a practice known as “robosigning”3 of sworn documents in thousands of foreclosures throughout the United States.4
Ally is a nonsupervised FHA direct endorsement lender that can originate, sponsor, and service FHA-insured loans. During Federal fiscal years 2009 and 2010,5 Ally submitted 6,808 FHA claims totaling $897.3 million.6
Ally issued a press release on September 24, 2010, stating that a procedural error was found to have occurred in certain of its affidavits required in certain States. It further stated in the press release that it was temporarily suspending evictions and postforeclosure closings in the 23 judicial States while it conducted a review. On October 12, 2010, Ally issued another press release, stating that it had found no evidence to date of any inappropriate foreclosures. As of September 30, 2010, Ally was servicing more than 199,000 FHA-insured mortgages, and more than 5,000 of these were going through its foreclosure process. From October 2008 through September 2010, Ally submitted 1,345 conveyance claims7 to the U.S. Department of Housing and Urban Development (HUD) totaling about $160.5 million in 23 judicial foreclosure States and jurisdictions. Because we identified potential False Claims Act8 violations, we provided the U.S. Department of Justice (DOJ) with our analyses and preliminary conclusions as to whether Ally engaged in the reported foreclosure practices.
DOJ used our review and analysis in negotiating a settlement agreement with Ally. On February 9, 2012, DOJ and 49 State attorneys general announced a proposed settlement of $25 billion with Ally and four other mortgage servicers for their reported violations of foreclosure requirements. As part of the proposed settlement agreement, each of the five servicers will pay a portion of the settlement to the United States and also must undertake certain consumer relief activities. The proposed settlement agreement described tentative credits that each mortgage servicer would receive for modifying loans, including principal reduction and refinancing, and established a monitoring committee9 and a monitor to ensure compliance with agreed-upon servicing standards and the consumer relief provisions. Once the final settlement agreement has been approved by the court, OIG will issue a separate summary memorandum detailing each of the five servicers’ allocated share of payment due as a result of the settlement agreement. Our objective was to determine whether Ally complied with applicable foreclosure procedures when processing foreclosures on FHA-insured loans.
Full report below…