Ohio accuses Ally of 'fraudulent' foreclosures





NEW YORK (CNNMoney.com) -- Ally Financial and its subsidiary GMAC Mortgage are being sued by the Ohio Attorney General for allegedly submitting fraudulent documents in hundreds of foreclosure cases across the state.

The lawsuit, filed Wednesday in Lucas County, comes after Ally halted foreclosures last week in Ohio and the 22 other U.S. states that require judicial approval of the process. The move came after it was revealed that some bank employees had signed foreclosure affidavits without verifying that the documents were accurate, a process now known as "robo-signing."

Attorney General Richard Cordray has requested an injunction that would block Ally from moving forward on any pending foreclosure in Ohio or allowing the home to be sold. He is also asking for civil penalties of up to $25,000 for every violation of Ohio law and for consumer restitution.

"We know that as Ohioans were fighting to save their homes, this loan servicer benefited financially from the dire circumstances," Cordray said in a statement. "Instead of stepping up and assisting those at risk of losing their homes, it is clear that GMAC chose to compound the problem through fraudulent and unfair and deceptive practices."

Ally maintains that its actions were not fraudulent and said it would fight the charges.

"There was nothing fraudulent or deceitful about GMAC Mortgage's practices," James Olecki, a company spokesman told CNNMoney.com. "If procedural mistakes were made in the completion of certain legal documents, GMAC Mortgage reacted proactively to the situation and immediately undertook to remedy the situation."

He said foreclosures are typically not filed until the customers are six to 12 months delinquent, "so the fact of default and the right to foreclose are not in dispute."

Cordray also called on JPMorgan (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) to suspend foreclosures that may have involved robo-signed documents. He also sent letters to Wells Fargo (WFC, Fortune 500) and Citibank (C, Fortune 500), asking them to meet with his office to discuss foreclosure affidavit procedures.

However, JPMorgan and Bank of America both announced plans to halt foreclosures in the so-called judicial states, pending an internal review of the banks' processes.