house foreclosureGMAC Mortgage told its agents and brokers to stop foreclosures on homes in 23 states, including Florida, Illinois, Indiana and Ohio, according to a media report.

GMAC Mortgage told brokers to stop evictions, cash-for-key transactions and lockouts, regardless of occupant type, with immediate effect, according to a memo obtained by Bloomberg. The lender will also suspend sales of properties on which it has already foreclosed, according to the report.

GMAC Mortgage is a division of Ally Financial (GJM), which was known as GMAC Inc. before the financial crisis hit. The company received than $17 billion in federal bailout funds before rebranding itself last year.

UPDATE: Ally has issued a press release denying that GMAC Mortgage is halting foreclosures. Here is the text of the press release:

Recent reports have stated that GMAC Mortgage instituted a moratorium on all residential foreclosures in 23 states. This is not true. In fact, all new residential foreclosures are continuing in the ordinary course of business with no interruption in our usual practice.

The speculation likely emanates from a direction previously given by GMAC Mortgage to certain of its outsource vendors to allow time to address a potential issue that was raised in a number of existing foreclosures challenging the internal procedure we used for executing one or more judicially required forms. This direction was to suspend evictions and REO closings where the related foreclosure could have been impacted by the same internal procedure. We are also reviewing certain previously completed foreclosures where the same procedure may have been used.

We are unable to comment on the specific merits of the challenge because some of them are in litigation. Nevertheless, a new process has already been developed and implemented so that though some existing foreclosures may experience delays while corrective action is taken, there will be no interruption in new foreclosures. These delays are expected to be resolved within the next few weeks and certainly before year end, without serious consequence. GMAC Mortgage has been addressing the procedural challenge for more than three months. In all other respects, the mortgage business is operating as usual.

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