Various state attorneys general have initiated probes of the foreclosure practices of Ally Financial Inc.’s GMAC mortgage unit after Ally announced last week that it had not instituted a moratorium on residential foreclosures in 23 states, but rather that it had suspended evictions and post-foreclosure closings in the 23 states while it conducted a review of defective foreclosure practices. Ally, the nation’s fourth largest home mortgage lender, stated that “a procedural error was found to have occurred in certain affidavits required in certain states” that was unrelated “to the accuracy of the underlying transaction or the ultimate decisions to have exercised the foreclosure proceedings.” It noted that the error involved two specific areas: (1) signing the affidavit in the physical presence of a notary public; and (2) signing the affidavit with direct personal knowledge of all the information stated in the affidavit, rather than knowledge and reliance upon the direct personal knowledge of other personnel, agents and local foreclosure counsel.

In response to numerous media reports regarding Ally’s announcements and the alleged admission by an Ally employee that he routinely signed affidavits for foreclosure lawsuits and submitted them to Ally’s attorneys without reviewing the homeowners’ underlying loan documents, attorneys general from various states, including Ohio, California, Connecticut, Illinois, Iowa and North Carolina, have announced investigations into Ally’s foreclosure practices, and have ordered foreclosure freezes in their states.

Today, Ohio Attorney General Richard Cordray sent a letter requesting the Ohio state courts to undertake a special review of all foreclosure cases that involve GMAC Mortgage. North Carolina Attorney General Roy Cooper sent a letter yesterday to Ally requesting more information about claims that the company failed to provide accurate information on foreclosure documents filed with the courts. Connecticut Attorney General Richard Blumenthal also announced yesterday that his office is investigating defective foreclosure documents filed by Ally in Connecticut and demanded the company freeze all foreclosures in the state. Last week, California Attorney General Edmund Brown Jr. sent a letter to Ally directing it to prove immediately that it is complying with state law or, if it could not, to cease and desist from foreclosing on California homes. Illinois Attorney General Lisa Madigan also sent a letter to Ally last week demanding a meeting to address concerns that the company had violated the state’s Consumer Fraud Act in its pursuit of Illinois homeowners in foreclosure. Iowa Attorney General Tom Miller announced that he had formally requested Ally "to provide information regarding the number of foreclosure case affidavits the company had submitted to Iowa courts which were not based on personal knowledge, as required by Iowa law," and information about "steps Ally is implementing to ensure all affidavits comply with state law and court rules."