GMAC, the mortgage arm of Ally Financial, will cease most of its mortgage lending in Massachusetts.
The announcement came a day after Massachusetts Attorney General Martha Coakley filed suit against GMAC and four other major mortgage servicers, alleging illegal foreclosure practices in Massachusetts.
GMAC says it will stop buying loans from correspondent lenders and wholesale brokers, which was how most of its lending is done in Massachusetts.
Was the timing of the announcement a mere coincidence?
It depends on whom you ask.
GMAC says in a statement that "it has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable."
According a story in The Wall Street Journal, Coakley says GMAC has to follow the law before foreclosing on homeowners in Massachusetts. Coakley says the lender's latest action makes it seem like "GMAC has acknowledged it has a problem following those laws and being held accountable for doing so."
GMAC says that's an incorrect statement.
The lender says it is "disappointed that it can no longer participate in offering certain financing options in Massachusetts; however, 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."
Oh, by the way, I forgot to mention that we are talking about a lender that is owned mostly by the U.S. government after a series of bailout packages during the 2008 crisis.
As for the 60-page lawsuit filed by Coakley, it will be interesting to see how far that one gets and how soon before we start hearing of settlement talks, which is how most of these state suits are likely to end.
Coakley sounds determined:
"The continued behavior, every day of bank’s behavior, continues to fray the fabric of a very fragile economy -- a fragile economy their own behavior contributed to," she said during a news conference last week, according to a transcript. "And now as they rush to foreclose, we believe unnecessarily, unlawfully in Massachusetts, and indeed across the country -- we say today that enough is enough."
Let's wait and see who wins this one.
I'll keep you posted if you follow me on Twitter @Polyanad