Ally Bank, as you probably don't know, had about 33 of its subsidiaries file for chapter 11 bankruptcy protection recently. (It was just one subsidiary with a variety of operating names, I believe). The filing did not make big news outside of the bankruptcy and foreclosure circles, even though it should have, because it was a filing for chapter 11 by one of the big five banks that signed the almost-certain-to-fail National Mortgage Settlement (which lasts 3 years and hasn't been converted into legislation and which doesn't, at present, have anyone to implement it), and also because some people are saying that Ally is using the filing not only to get out of the National Mortgage Fake Settlement, but to avoid having to modify loans:
The New York Post has a story from May 21 about a family that had their deal put on hold by the filing, and it includes these chilling words:
The giant servicer will continue operating while selling assets. But GMAC has sent out notices to attorneys regarding non-foreclosure litigation, indicating it’s taking advantage of the automatic freeze bankruptcy puts on such cases. That will further burden New York’s overstressed court system, as consumers from across the nation seek hearings in the Southern District, where the case was filed.
“GMAC is using bankruptcy to maximize its position in litigation,” said Tirelli. “It will proceed in foreclosures, but for any borrower with a claim against GMAC, they are saying, Sorry, go to NY and file a motion.’”
In addition, homeowners negotiating a foreclosure settlement deal or loan modification will likely have to start again after the servicing rights are sold, since such deals are not usually transferred, said lawyer Max Gardner.
(Source.) The failure to "Go to NY and file a motion" would mean that the homeowners and the lawyers would potentially be in contempt of court.
Ally has more to fear than simply modifying mortgages to try to get the money flowing into it again: a letter from the accounting firm hired to review loans as part of a prior agreement with regulators (if you're keeping track there are about 13 zillion agreements between the banks and the federal government, all of them agreeing to keep on agreeing to not violate the laws) said that ALly:
-- started foreclosure proceedings on 1,270 borrowers who were in some stage of the bankruptcy process, and thus should have been protected from foreclosure.
--carried out foreclosure sales on 1,577 borrowers who were awaiting a decision about a loan modification.That is: Ally has about 85,000 problematic foreclosures according to its own accountants. And "problematic" equals potential civil claims.
-- hired a law firm that was subsequently "delisted" to process 30,235 foreclosures. The names of the firms are redacted, but presumably include several of those accused of forging documents as part of the robo-signing scandal.
--- denied 50,030 borrowers for a government-run Home Affordable Modification Program, and then offered no alternative modification.
Not that anyone's worrying: Ally doesn't care about the homeowners, many of whom haven't hired lawyers or hire incompetent lawyers and nobody's even mentioning them: this report says Ally has settled with key creditors, none of whom are you.
On the plus side, Nationstar apparently is going to buy all the mortgage servicing claims, which will make them the biggest non-bank servicer in the country, so I look forward to years of lack of communication, overcomplication, reliance on computer programs, and other problems from them. Remember: everytime a bank grows larger, a consumer litigation attorney gets his wings. (And by wings, I mean dozens of new clients.)
