GMAC threatens Mass. for considering enforcing law.

[SirNitram]

Link

GMAC Mortgage, one of five banks that Attorney General Martha Coakley is suing over allegations they violated foreclosure laws, announced plans Friday to halt most lending in Massachusetts, citing an obligation to “manage risks and deploy capital in an appropriate manner.”

The company said it will “cease purchasing new mortgage loans in the Commonwealth of Massachusetts that are originated by correspondent lenders and wholesale brokers.

“GMAC Mortgage has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable. The company will continue to service its existing customers and honor its contractual obligations as a servicer,” GMAC said in a statement.

According to the company, GMAC has completed “745,000 borrower workouts since 2008, representing 27 percent of the loans serviced.”

Coakley’s office dismissed the bank’s concerns as an admission of improper activity.

“In order to do business in Massachusetts, GMAC has to follow the law before foreclosing on homeowners,” Coakley said in a statement. “With today’s action, it appears GMAC has acknowledged it has a problem following those laws and being held accountable for doing so.”

Coakley’s lawsuit, filed Thursday in Suffolk Superior Court, accuses Bank of America, Wells Fargo, JP Morgan Chase, Citi and GMAC of using fraudulent documentation during foreclosure proceedings, including so-called “robo-signing,” and illegally foreclosed on properties without holding the actual mortgages.

Coakley also claimed the banks failed to uphold loan modification promises to Massachusetts homeowners.

Coakley described the lawsuit as the nation’s first comprehensive legal action against the five major national banks regarding the foreclosure crisis that hobbled the country’s housing market and contributed to a deep recession, impacting more than 45,000 Massachusetts homeowners. Coakley said she did not know how many homeowners were victims of the alleged deceptive practices.

The suit also names Mortgage Electronic Registration System, Inc. and its parent company MERSCORP Inc.

The complaint follows more than a year of negotiations with the banks over a 50-state settlement regarding the use of fraudulent documentation. Coakley said she had lost faith in the negotiation process, but would not rule out signing an agreement if one could be reached before the lawsuit is resolved.

Several of the banks named in the suit responded by criticizing Coakley for distracting from negotiations ongoing with states around the country and initiating what could be a lengthy legal proceeding that will delay relief for homeowners. A spokesman for Citi also denied that the bank had done anything illegal.

Dare enforce a law against them, and they threaten leave in a huff. Spoiled brats. Not unexpected, though, when I remember early 2003, and Georgia's 'Fair Lending Act' attempt. S&P pulled up in the same way, threatening to basically fire a shotgun into the residential market. Unsurprisingly, that bill got dropped fast.

[Broken]

Good for AG Coakley, I hope this forces the banks to come clean and disclose documents that they have so far successfully shielded from review. The New York Times had an interesting article on this action, where it was quoted Kurt Eggert, a professor at Chapman University School of Law in California who is an expert in mortgages and securitization,

“If the state can go forward and do real discovery, it will be the first time that anyone has really dug into the servicers’ files to see what they have done,” he added. “The feds conducted an investigation where they looked at very few files, and here the state could demand to see a lot.”

Of course, I expect these banks to fight tooth and nail against the sheer arrogance of a mere government employee trying to investigate how and the amount of money they make in their pursuit of ever-higher numbers.

[Molyneux]

I'll be waiting for further updates on this issue with great interest.
Wish someone had the balls to push something like that through in NY.

[Edi]

The claims of sabotaging negotiations by other states are a smokescreen, since that settlement would amount to a grand total of 20 billion from all the banks put together and allow them to get away without admitting any wrongdoing.

Glad to see this lawsuit against them, New York's Schneider could use some help from other quarters (he's been the single holdout so far).

[SpaceMarine93]

Are they threatening the American people's financial activities?

...

It's treason then.

(lol, copying Palpatine from Star Wars III)

To be honest, what are the chances that they will drop the case because of the bank threatening to do that?