MORTGAGE LOAN COMPLIANCE®

Ohio's Attorney General, Richard Cordray, is suing Ally Financial Inc. and its GMAC Mortgage division, alleging the company violated state fraud laws in handling foreclosure cases.

Cordray is asking for civil penalties of up to $25,000 for every violation of the state's consumer laws and for the company to pay back any financial losses to the homeowner. He also wants the court to halt any Ally foreclosure or sale of property now pending in Ohio.

The action could be the first in a wave of lawsuits by state regulators over what appear to be widespread problems in documents used by the nation's largest mortgage lenders.

Attorney General Cordray said Wednesday the alleged fraud could involve hundreds of foreclosures in the state. The lawsuit claims the company's employees signed and filed false affidavits to mislead courts. Cordray called the alleged fraud the "tip of an iceberg of industry-wide abuse of the foreclosure process."

Three banks have halted foreclosures in 23 states after evidence surfaced that their employees or outside lawyers signed documents without reading them or filed inaccurate paperwork. State and federal officials have been ramping up pressure on the industry over concerns about potential legal violations.

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