Catherine Curran, NY Post
Two weeks ago, a Westchester family had finally reached the end of seven years in foreclosure hell.
Then the plate tectonics of the massive bank that controls their fate shifted. Ally Financial, formerly GMAC, filed Chapter 11 bankruptcy for its troubled Residential Capital mortgage unit last Monday. Ally owes taxpayers roughly $12 billion in bailout money and is majority-owned by Uncle Sam.
This unprecedented bankruptcy of a mega-servicer is hitting ordinary New York families hard, with worse blows to come. Inside Mortgage Finance publisher Guy Cecala estimates the bankruptcy affects roughly 120,000 loans in New York, out of 2.4 million ResCap consumer mortgages.
Unemployment caused the Westchester family to miss mortgage payments and seek Chapter 13 bankruptcy protection. Now they are in limbo, awaiting approval by the ResCap Chapter 11 judge.
“Resolution is on hold,” said the family’s lawyer, Linda Tirelli, who could not disclose more details because the deal is still pending. “GMAC has sought bankruptcy protection like many of its customers have.”
The giant servicer will continue operating while selling assets. But GMAC has sent out notices to attorneys regarding non-foreclosure litigation, indicating it’s taking advantage of the automatic freeze bankruptcy puts on such cases.
That will further burden New York’s overstressed court system, as consumers from across the nation seek hearings in the Southern District, where the case was filed.