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Ally Financial expands foreclosure review to all 50 states

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Ally Financial (GJM), formerly GMAC, will review foreclosure procedures in all 50 states as it investigates possible default documentation problems. The action follows the Bank of America (BAC) extension of foreclosure halts to the entire nation last Friday, and mortgage finance analysts are now offering reasons as to why these overarching decisions are being made. In September, Ally announced a suspension in 23 states after employees signed foreclosure affidavits without reviewing documentation or a notary present. These robo-signers have been detected at BofA, JPMorgan Chase (JPM), PNC Financial (PNC), Goldman Sachs' (GS) Litton Loan Servicing, and OneWest Bank. BofA recently extended its suspension to all 50 states Friday, leaving analysts to question the reasons why: "Some market participants suspect political motivations — it’s right before an election, and it helps garner support from state attorneys general," reads a report out this week from the MBS Strategy Group of Amherst Securities. "Other market participants blame political pressure on Bank of America." They add that the likely reason is actually economic since Bank of America owns Balboa, a property and casualty insurance company. "When the borrower stops making his mortgage payment, he generally also stops making the tax and insurance payments," they add. After which, BofA force-places the P&C insurance with Balboa, at rates well above that charged by other property and casualty insurance companies. "So, Bank of America may be in a bit less of a hurry to liquidate than other servicers who do not own such an entity," the researcher conclude. According to Ally, specialized teams will review files nationwide to ensure that the borrowers were given opportunities to avoid foreclosure, and the file itself complies with all laws and requirements. "Foreclosure is a very serious matter and only implemented when all other home preservation options have been fully exhausted. We are taking these additional steps to restore confidence in the process, which is critical for the stability of the home and mortgage industry," according to Ally. The announcement comes the same day several state attorneys general offices are organizing a coalition to investigate these lenders. Write to Jon Prior. The author holds no relevant investments. Additional reporting by Jacob Gaffney

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