""Ally Financial's"":http://www.ally.com ""GMAC Mortgage"":http://www.gmacmortgage.com subsidiary was the first major servicer to admit to problems in its foreclosure procedures that led to errors in legal affidavits.
[IMAGE] The findings led the company to freeze foreclosures and REO sales in certain states and cast a shadow of doubt over the integrity of the entire industry's servicing practices, as several other large lenders followed suit with their own foreclosure suspensions and affidavit reviews.
""We had a robo-signer affidavit problem. No question about it. We're embarrassed about it and we fixed it going forward,"" said CEO Michael Carpenter in Ally's third-quarter conference call with analysts and investors on Wednesday.
""We'll be the first to say we screwed up on robo-signer affidavits, but we are not going to say we screwed up on foreclosures,"" he said.
Ally's chief executive pointed out that by the time a case reaches the point of foreclosure sale, the average borrower has not made a mortgage payment for 15 months. Their delinquency is not a question at that point, Carpenter stressed.
""We are confident that we did not foreclose on anybody inappropriately. But it's up to us to prove that,"" Carpenter stated.
He said his company is reviewing all files in all 50 states that go to foreclosure sale. Ally has retained three law firms and one accounting firm to provide independent reviews to ensure the company has done everything it can in terms of loan modification and that the appropriate procedures have been followed, according to Carpenter.
So far, the company has re-filed 9,523 affidavits with the courts. Carpenter says there's another 15,500 cases left to review, but he expects all reviews and fixes to be made by the end of the year.[COLUMN_BREAK]
He also stressed that Ally/GMAC Mortgage is implementing fundamental changes to its procedures, including modifying the affidavit process to guarantee accuracy and legitimacy and substantially increasing the company's servicing staff.
Ally posted its third consecutive profitable quarter in Q3. The New York-based ""company reported Wednesday"":http://media.ally.com/index.php?s=43&item=428 that it brought in net income of $269 million during the July to September period. That compares to a net loss of $767 million for the third quarter of 2009.
The company increased its reserve for mortgage repurchases to $1.1 billion during the third quarter of 2010. Ally says it has already completed settlements with six counterparties, including Freddie Mac, and the company maintains that the money it's set aside for loan buybacks has been closely in line with repurchase requests.
Overall mortgage operations posted a $154 million profit last quarter. Carpenter said when he took the reins nearly a year ago, it was the mortgage business that was holding the company back. He called it a ""black hole.""
But since that time, the company has been successful in selling off large chunks of the mortgage portfolio, the sections Carpenter said proved to big the biggest losers for the company.
Residential Capital, LLC (ResCap) completed the sales of its European mortgage assets and operations, including approximately $11 billion of securitized loans, other loan assets, and servicing rights, as well as the shares of operating entities in the U.K., Germany, and the Netherlands. It's also sold legacy mortgage assets totaling approximately $1.9 billion of unpaid principal balance to date in 2010, at a gain.
A year ago, Ally was entertaining the idea of selling the entire ResCap unit, looking at ""strategic alternatives"" for the business, as the company put it. But now, it's off the table.
""Today, we believe we have effectively de-risked our mortgage business and redefined its strategy,"" Carpenter said. ""In the future, the focus will be on origination and servicing of agency business.""
There are individual mortgage assets still up for sale if the price is right, but the company now has no intention of selling the ResCap origination business, according to Carpenter.