Submitted by Tyler Durden on 09/20/2010 08:39 -0500

• Ally Bank
• Bloomberg News
• Florida
• GMAC

As we pointed out last week, a certain judge in Florida set quite a precedent when he found that JPM, as servicer for a Fannie mortgage, had committed court fraud by foreclosing while not in possession of the actual mortgage. We then concluded that “The implications for the REO and foreclosures track for banks could be dire as a result of this ruling, as this could severely impact the ongoing attempt by banks to hide as much excess inventory in their books in the quietest way possible.” Not a week has passed since, and we are already proven right. Today, Bloomberg discloses that GMAC Mortgage, a unit of the affectionately renamed Ally Bank, has halted all foreclosures in 23 states, including Florida, Connecticut and New York. Who would have thought that being caught with your pants down, doing something so blatantly illegal as collecting on something you do not own, would actually have adverse consequences. And GMAC is just the beginning – we expect many more mortgage servicers to scurry now that the light has been shone on their shell game. The silver lining – the permabull pundits will cheer this development now that foreclosures will plunge off a cliff as mortgage holders and servicers scramble to reconcile who owns what, and just on whose balance sheet the mortgage flows should show up.