WASHINGTON (AP) – Ally Financial and its related companies are paying about $198 million to settle federal complaints that the companies wrongfully foreclosed on homeowners.
The Federal Reserve announced the agreement Friday with Ally Financial, the former lending arm of General Motors known as GMAC Mortgage.
Ally's settlement is similar to accords between federal regulators and 13 other banks that ended a review of loan files required under a 2011 government action. The banks included JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, MetLife Bank, Goldman Sachs and Morgan Stanley. Altogether, they are paying roughly $9.3 billion.
The settlements could compensate hundreds of thousands of Americans. Many had their homes seized because of abuses such as "robo-signing," when banks automatically signed off on foreclosures without properly reviewing documents. The agreement will also help eliminate huge potential liabilities for the banks.
Consumer advocates say regulators settled for too low a price by letting banks avoid full responsibility for foreclosures that victimized families.
The settlements cover borrowers whose homes were in any stage of the foreclosure process in 2009 or 2010.
Ally also was among the five major banks that struck a separate $25 billion agreement in February 2012 over alleged foreclosure abuses with the federal government and 49 states. The others were Bank of America, Citigroup, JPMorgan and Wells Fargo.
GMAC received a $17.2 billion bailout during the 2008 financial crisis. The government still owns 74 percent of the company. Its affiliated mortgage-lending company Residential Capital, or ResCap, filed for bankruptcy protection last year.
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