* GMAC's halt comes day after Massachusetts lawsuit
* GMAC parent is limiting correspondent lending
* Other U.S. banks have shuttered correspondent units
By Joe Rauch and Brenton Cordeiro
Dec 2 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 Dec. 5, 2011, and will continue to service its
existing customers and honor its contractual obligations as a
The move comes a day after the Massachusetts attorney
general filed a lawsuit against five large U.S. banks -- Bank
of America Corp , JPMorgan Chase & Co , Citigroup , Wells Fargo & Co and GMAC -- accusing them of
deceptive foreclosure practices, such as using robo-signers and
"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
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
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
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.