Homeowners facing foreclosure may see some relief in upcoming weeks as California attorney general Edmund G. Brown Jr. has forced a collection agency to halt seizures due to shoddy paperwork and lack of due diligence. Attorney General Brown demanded that the collection agency Ally Financial stop foreclosures in California if it could not “immediately prove” that it actually substantively reviewed the 10,000 foreclosure filings it sent to court on a monthly basis.
The order comes four days after Ally said it had found a “technical” problem with documents it submitted in support of them. An employee of Ally’s GMAC mortgage unit, Jeffrey Stephan, admitted in sworn depositions that he signed off on 10,000 documents a month without reading them.
Ally — in which the U.S. Treasury holds a 56 percent stake after a $17 billion federal bailout — said on Monday that it had initiated a temporary moratorium on evictions and sales of repossessed homes in 23 states while it reviewed individual cases. The 23 states on the company’s list are those that require a court order for foreclosures.
States that do not have that requirement — including California, Maryland and Virginia, as well as the District — were not on that list. The Washington Post reported Friday that Stephan had also signed off on documents in the other 27 states and that in at least some cases those documents appeared faulty.
“I’m taking this action to protect California homeowners facing the tragedy of foreclosure,” Brown said in a statement. “They are clearly in jeopardy since an Ally Financial official admitted his review of thousands of critical foreclosure documents was really a sham.”
State attorneys in Illinois, Iowa, Texas and Florida have also announced they are investigating the matter.