Ally Financial: Newly Released Letter Show Scope Of Possible Mortgage Screwups
Trying to count the number of bank screwups during the foreclosure crisis is a little like guessing the amount of change in a huge jar: You can see that the answer is “an awful lot,” but without breaking the jar and counting by hand, there’s no way to know for sure.
On Thursday, however, just how much homeowner misery Ally Financial may be responsible for came to light after the Federal Reserve released a letter between the bank’s mortgage servicing unit, GMAC Mortgage, and its auditing firm detailing exactly how many borrowers’ cases may have been mishandled.
Ally, formerly an arm of General Motors, needed a $17.2 billion bailout to survive the mortgage crash. It repaid about $5.5 billion, meaning taxpayers own 74 percent of the bank. Earlier this month, the bank sought Chapter 11 bankruptcy protection for ResCap, its residential mortgage unit.
In response to the bankruptcy proceedings, which typically require a public disclosure of financial information, the Federal Reserve released a letter between the bank’s mortgage servicing unit, GMAC Mortgage, and the accounting firm GMAC hired to audit its loan files as part of a 2011 agreement with federal regulators.
The letter, dated Feb. 1 is from GMAC to its auditor, PricewaterhouseCoopers, and includes some details of the review. It also puts a number on some of the mortgages the bank may have handled incorrectly. Some highlights:
- GMAC started foreclosure proceedings on 1,270 borrowers who were in some stage of the bankruptcy process, and thus should have been protected from foreclosure.
- GMAC carried out foreclosure sales on 1,577 borrowers who were awaiting a decision about a loan modification. This is known as “dual tracking” and is one of the biggest complaints of homeowners and their advocates.
- The mortgage servicer hired a law firm that was subsequently “delisted” to process 30,235 foreclosures. The names of the firms are redacted, but presumably include several of those accused of forging documents as part of the robo-signing scandal.
- The mortgage servicer denied 50,030 borrowers for a government-run Home Affordable Modification Program, and then offered no alternative modification.
Copy of the letter below…