Martha Coakley’s lawsuit against big banks for foreclosure fraud has already had one dramatic consequence. GMAC Mortgage, the lender for Ally Bank, and one of the five banks named in the lawsuit, has pulled out of Massachusetts. And they’re being really whiny about it:
The nation’s fifth-largest mortgage originator said it “has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable,” ratcheting up the high-stakes mortgage fight there [...]
Ally had said Thursday it would vigorously defend itself and was disappointed “the Attorney General has elected not to continue a more constructive path that could help borrowers in the state, but rather has chosen to use the court process.”
On Friday, the lender, now owned 74% by the U.S. government, reacted.
GMAC Mortgage will stop purchasing loans from correspondent lenders and wholesale brokers, which makes up the majority of the company’s business. The lender said it was “disappointed” but 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.”
To this I say, don’t let the door hit ya where the good Lord split ya. I recently did a mortgage refinance. I did it online and over the phone with a community bank, I never had to deal with the likes of Bank of America or Wells Fargo or Citi or JPMorgan Chase or GMAC Mortgage, I got a great rate, and everything proceeded swimmingly. Creditworthy borrowers still have a variety of options in Massachusetts, and that will be true even if all the big banks follow GMAC out the door. The only difference is that their lender may not be actively working to screw them over.
Anyway, GMAC is not leaving Massachusetts totally, they’re just ending the correspondent lending business, where a smaller bank does the origination and they pick up the loan later. They will still lend directly to homeowners in the state. So you can spare me with the nonsense that Martha Coakley hurt Massachusetts borrowers by forcing these lenders out of state. She did them a great service, with the only caveat being that the lenders aren’t totally pulling up stakes.
This is petty, but ultimately meaningless. I know a way for GMAC to keep lending in Massachusetts: follow the law.
UPDATE: Matt Stoller has the proper level of outrage at this action. It’s a pure bullying tactic.