Moody's Investors Service will review GMAC Mortgage, now known as Ally Financial, for a possible downgrade of its servicer quality rating following recent issues with foreclosure documents.
Earlier this week, GMAC suspended evictions on foreclosure cases where faulty affidavits were detected. The suspension came across 23 states including New York, Illinois and Florida. GMAC denied an official foreclosure moratorium.
A spokesman for Moody's told HousingWire this is a review of the primary servicer operation at GMAC, and that its master servicing rating has been confirmed.
Moody's rates servicers on a scale of SQ1 as the strongest, to SQ5 as weakest. Currently Moody's rates the GMAC prime mortgage servicing operation at a SQ3+, and a lower SQ3 rating for its subprime, second-lien and special servicing divisions.
"The rating action is due to irregularities in GMAC Mortgage's foreclosure process that have recently come to light," according to Moody's.
The incident could result in delayed foreclosure timelines, legal challenges to previously completed foreclosures, and reputational risk.
GMAC earlier this week said its employees have signed affidavits without full knowledge of the facts in the document and often without a notary. GMAC also said an internal review revealed no factual misstatements contained in the affidavits such as the loan balance, its delinquency and who actually owned the note on the mortgage, but some cases are still pending legal action.
"We believe that the substantive content of the affidavits in question were factually accurate," James Olecki, a spokesman for GMAC, told HousingWire in response to the review. "Our internal review to date has revealed no evidence of any factual misstatements or inaccuracies concerning the details typically contained in these affidavits such as the loan balance, its delinquency, and the accuracy of the note and mortgage. We are working expeditiously to address all of the foreclosure proceedings that may have had a procedural error and we hope to see the vast majority of them remediated over the coming weeks and before year-end."
During the review, Moody's will determine how long the foreclosure and REO liquidation timelines will be extended and will review the legal and financial impact of these developments.
As of July 31, GMAC's primary servicing portfolio totaled 26 million loans for an unpaid principal balance of roughly $380 billion.
by John Prior HousingWire September 24, 2010
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