Ally suspends evictions on foreclosed homes

Ally Financial, the troubled lender that received a massive federal bailout, has temporarily halted evictions on foreclosed homes in 23 states, a company spokesman said Monday.

The firm, once the financing arm of General Motors, said late Monday that the moratorium was due to "an important but technical defect" in the company's court filings for individual foreclosures.

The firm, once the financing arm of General Motors, said late Monday that the moratorium was due to "an important but technical defect" in the company's court filings for individual foreclosures.

Ally spokesman James Olecki said that in a number of cases the legal documents from the company's mortgage arm in support of the foreclosure proceedings "may have been executed without direct personal knowledge stated in the affidavit" and were not signed in the presence of a notary public.

But pro bono attorneys said the suspension of evictions came after their lawsuits filed against the company in Maine revealed that a single employee of Ally Financial may have approved tens of thousands of foreclosures across the country without reviewing the documents he was signing.

In a deposition, the employee stated that when he put his signature on case files, he did not know what information the file contained other than the borrower's name, that he did not inspect the exhibits he was supposed to, and that the notary who supposedly witnessed his signings was not in the room.

Thomas Cox, a lawyer in Portland, Maine, who took the deposition while representing homeowners, said in a phone interview that it's clear that this employee "doesn't know what he's talking about."

"We've established that in these foreclosures GMAC hasn't proven its case," Cox said.

Cox said the Maine attorney general's office is investigating the matter. The GMAC employee's name also came up in several mortgage foreclosure cases in Florida that are being disputed. The attorney general there is investigating at least four law firms that process foreclosures there, saying that they may be fabricating information or presenting misleading documents in cases.

Olecki declined to respond to specific questions on the pending litigation, but emphasized that the "sum and substance" of the company's foreclosure filings were correct. And an internal review has found that there were no "factual misstatements or inaccuracies" about the mortgage holders or the delinquency of their loans, he said. The vast majority of cases will be resolved in the next few weeks. Some, however, will require "court intervention," Olecki said.

He said that the suspensions will give the company time to review files across the 23 states, which span the country from New York to Florida and Hawaii. These states follow a judicial procedure that requires a court order to approve a foreclosure. A bank representative must sign off on the validity of a foreclosure filing after checking that the correct mortgage holder is named and that he or she is truly in default, among other things.

The U.S. Treasury Department, which owns a 56.3 percent stake in GMAC after bailing it out last year, was not involved in the decision, Olecki said.