Massachusetts Attorney General Martha Coakley in a letter to Sen. Tim Johnson (D., S.D.) and Rep. Spencer Bachus (R., Ala.) yesterday asked the legislators to look into Ally Financial's alleged improper foreclosure actions. For a copy of the letter, please click here.

Coakley in her letter said: "In light of Ally's alleged deceptive and illegal actions against homeowners in Massachusetts and across the country, I respectfully request that your committees investigate Ally's serious misconduct and consider what actions the federal government can take to ensure that Ally adheres to the law."

In Coakley's letter, she cited that the U.S. Treasury owns roughly 74% of Ally Financial. She also mentioned that the U.S. invested $17 billion in Ally in 2008 and, unlike some of the other banks, the firm has only paid a small portion of that back.

As ASR sister publication National Mortgage News reported in this story, the letter comes after GMAC Mortgage, a unit of government-owned Ally, on Friday stated it will stop buying loans originated by mortgage correspondents or brokers in Massachusetts. The firm cited the regulatory environment in the state as a reason for its decision. The Ally unit stated that it will honor all commitments through Dec. 5. 

Massachusetts Thursday sued the nation's five largest residential servicers, alleging their foreclosure practices were unlawful and deceptive, NMN also reported in another article published the same day.

Coakley said in a statement that the lawsuit "seeks accountability for the banks' unlawful and deceptive conduct in the foreclosure process" and comes after over a year of negotiations.

Aside from Ally, the five sued include Bank of America, Wells Fargo, JPMorgan Chase, Citigroup.

The state also named Mortgage Electronic Registration System or MERS, which is the system that helped the banks in completing foreclosures.

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