GMAC to stop some mortgage loans in Massachusetts
(Reuters) - GMAC Mortgage, the mortgage arm of Ally Financial Inc, said on Friday it will stop buying new mortgage loans in Massachusetts that were made by other correspondent lenders and wholesale brokers.
GMAC said it will honor all commitments made with such lenders as of December 5, 2011, and will continue to service its existing customers and honor its contractual obligations as a servicer.
The move comes a day after the Massachusetts attorney general filed a lawsuit against five large U.S. banks -- Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N), Citigroup (C.N), Wells Fargo & Co (WFC.N) and GMAC -- accusing them of deceptive foreclosure practices, such as using robo-signers and false documents.
"GMAC Mortgage has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable," the company said in a statement.
GMAC said it will continue to make loans to Massachusetts customers through its direct lending business.
A spokesperson for Ally Financial said in an e-mailed statement that "GMAC Mortgage is currently operating in full compliance with the law. Any suggestion related to past activity will be heard before the court, and we are confident in our ability to prevail."
Analysts said the move is unlikely to be followed by other lenders named in the Massachusetts lawsuit.
"There's so much posturing in this," said Marty Mosby, bank analyst with Guggenheim Securities. "It's almost like someone shoots across someone's bow, and they just shoot back."
Massachusetts Attorney General Martha Coakley criticized the move and in a prepared statement said that GMAC must "follow the law before foreclosure on homeowners."
"With today's action, it appears GMAC has acknowledged it has a problem following those laws and being held accountable for doing so," she said.
Ally Financial was the state's fourth-largest mortgage lender, when ranked by volume of loans sold to Fannie Mae and Freddie Mac, through the first six months of 2011, said Guy Cecala, publisher of Inside Mortgage Finance, an industry trade publication.
Ally Financial sold $1.5 billion loans to the U.S. government-backed mortgage investment companies, totaling 8,000 loans so far this year, Cecala said.
Overall, Massachusetts is the seventh-largest U.S. state for loans sold to Fannie Mae and Freddie Mac, Cecala said.
In November, Ally Financial announced plans to scale back its correspondent lending operations company-wide, following other U.S. banks in limiting those types of mortgage loans.
In correspondent lending, banks buy loans originated by outside banks.
An Ally Financial spokeswoman said the cutback is due to the rising costs of mortgage lending in Massachusetts, and is separate from the company's broader rollback.
Other large banks have also curbed their correspondent lending efforts.
Bank of America, the second-largest U.S. bank by assets, said earlier this year it planned to shutter its correspondent lending unit by the end of 2011.
(Reporting by Joe Rauch in Charlotte, North Carolina and Brenton Cordeiro in Bangalore; Additional reporting by Aruna Viswanatha in Washington, D.C.; Editing by Supriya Kurane, Gerald E. McCormick and Gunna Dickson)
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