GMAC Mortgage said that it will stop purchasing new mortgage loans in Massachusetts, a day after the state's attorney general sued its parent company for alleged misconduct regarding foreclosures.
GMAC, the mortgage origination and servicing unit of Ally Financial Inc., said in a press release on Friday that it has taken this step "because recent developments have led mortgage lending in Massachusetts to no longer be viable." The company said that it "has an obligation to manage risks and deploy capital in an appropriate manner and in a way that protects the investment of the U.S. taxpayer."
Massachusetts Attorney General Martha Coakley filed the suit in state court on Thursday, alleging that the foreclosure practices of Ally, Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. were unlawful and deceptive.
Negotiations between all 50 state attorneys general and mortgage lenders to settle similar claims have been strained. Coakley said in October that she had "lost confidence" that the banks would be held accountable for their actions. And California Attorney General Kamala D. Harris previously withdrew from the negotiations, stating that the deal being discussed was "inadequate for California homeowners."
GMAC said it will honor all commitments with correspondent lenders and wholesale brokers as of Dec. 5. It will continue to service its existing customers and contractual obligations as a servicer. GMAC said that it has completed 745,000 borrower workouts since 2008, representing about 27% of the loans serviced.