Ohio AG to Ally: Stop foreclosure sales

NEW YORK (CNNMoney.com) -- Ohio's top law enforcement official, firing another shot across the bow of Ally Financial, asked a judge on Friday to stop the sale of foreclosed homes in cases that relied on faulty paperwork.

State Attorney General Richard Cordray sued the lender last week, alleging that the bank and its employees had signed and filed at least hundreds and potentially thousands of false affidavits in foreclosure cases.

The cornerstone of the state's case is the testimony of Jeffrey Stephan, who has admitted to signing thousands of affidavits on Ally's behalf without person knowledge of the facts of each case, as required by law.

Ally has previously announced that it was temporarily suspending evictions and post-foreclosure closings in the 23 states in which judges must sign off before someone loses their home.

The company, previously known as GMAC, the finance arm of General Motors, has also hired outside accounting and legal firms to examine its foreclosure procedures in all 50 states.

But Cordray, who has been among the nation's most aggressive attorney generals on the issue of robo-signing, alleges that Ally is not acting to slow the foreclosure process in any meaningful way.

"GMAC is generally not moving to vacate the fraudulently obtained judgments. Indeed, often GMAC counsel is telling the courts that soon they expect to again request that the applicable Sheriffs sell the properties and evict the homeowners," according to a request for an injunction filed by Cordray Friday.

For its part, Ally denies it is proceeding with sales.

"GMAC Mortgage is not proceeding with foreclosure sales in Ohio using defective affidavits, spokesman Jim Olecki said in a statement. "We announced weeks ago that we were suspending evictions and foreclosure sales in the 23 judicial states, including Ohio, until a review was conducted and any needed remediation activity was completed in those affected cases."

On Wednesday, the top prosecutors in all 50 states announced a coordinated probe into improper foreclosures by the nation's largest loan servicers, but stopped short of calling for a freeze on all foreclosures.

The group of attorneys general and bank regulators will work to put an immediate stop to improper mortgage foreclosure practices. It will also review past and present practices by loan servicers and come up with potential remedies.