GMAC Mortgage has temporarily halted foreclosure proceedings on homeowners in 23 states including Florida, New York, Illinois and Ohio in a "corrective action" that may also delay closings on some bank-owned (REO) homes.

Closing dates on all REO sales will be extended by 30 days, with buyers having the right to cancel their purchase agreement and get their deposit back, Bloomberg News reported, citing a Sept. 17 internal company memo.

With the exception of North Carolina, all 23 affected states are "judicial foreclosure" states, requiring lenders to obtain a court order before initiating foreclosure proceedings. That’s led to speculation that GMAC Mortgage wants to make sure it can prove it is the noteholder on loans it forecloses on before initiating legal action.

In some judicial foreclosure states, troubled homeowners have challenged lenders foreclosing on them to prove that they have a right to collect on the debt by producing a mortgage note.

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing, Florida’s attorney general said last month in announcing investigations of law firms handling foreclosure cases.

The Florida attorney general is investigating whether documents produced in court by attorneys representing lenders have been "fabricated" by affiliated companies outside the U.S.

A spokesman for GMAC Mortgage parent company Ally Financial Inc. told the Washington Post that the company is reviewing its foreclosure procedures in 23 states, and removing states from the list once it’s determined that procedures comply with company policy.

The spokesman said it has no evidence that the proper procedures were not followed in any individual cases.

The affected states are: Connecticut, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin.

In an advisory to clients, Barclays Capital analysts Jasraj Vaidya and Sandipan Deb said Delaware was the only state in which a judicial foreclosure process is in place to be excluded from the GMAC Mortgage memo.

Depending on how long it is in place, the foreclosure moratorium could be a "mild positive" for housing in the near term, Vaidya and Deb said, as a reduction in REO supply and foreclosure sales by GMAC would take out some distressed supply from the market.

Any benefit would be counterbalanced by a larger shadow inventory of nonperforming loans, which creates pressure on home prices for an extended period, they said.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Thank you for subscribing to Morning Headlines.
Back to top
Network with CoStar, Redfin, Realogy, SERHANT., Divvy, and thousands more in-person at ICLV this October. Prices go up Sunday.Register Now×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription