Attorneys general join forces for foreclosure probe.
Stopping just short of demanding a nationwide moratorium on foreclosures, Attorneys General in all fifty states announced today they will investigate mortgage loan processors suspected of widespread negligence, abuse, and fraud. The announcement comes as two of the United States’ leading mortgage banks suspended foreclosures because of glaring omissions and improprieties in thousands of documents prepared for courts in all fifty states. Bank of America was the first to suspend foreclosures; J.P Morgan Chase quickly followed suit.
The investigation will focus, first, on B of A, J.P. Morgan, Ally Financial, and other major lenders accused of making false, erroneous, or deliberately misleading statements to their customers in order to speed-up evictions and gain possession of their homes. In thousands of cases, attorneys for homeowners have alleged lenders signed-off on foreclosure affidavits without meeting legal requirements for their review. If the allegations are true, lenders will face prosecution for unfair and deceptive trade practices; the banks could be liable for millions of dollars in fines and civil penalties.
The banks’ own inquiries first uncovered the problems among independent contractors hired strictly for the purpose of processing foreclosure documents. Many employed “robo-signers,” office workers who allegedly signed without reviewing, forged, or falsely notarized hundreds of thousands of documents. J.P. Morgan reported Wednesday announced it will expand it in-house inquiry to review of more than 114,000 cases in forty-one states. Ally has announced that it will look into cases in all fifty states, and Bank of America has frozen all sales of its bank-owned properties until its in-house review is complete.
Ohio’s Attorney General Richard Cordray has taken the most aggressive stand so far, filing suit against Ally Financial and telling The Washington Post, “”The most important thing that the lenders need to recognize is the seriousness of the situation. They can’t pretend this is a fourth-grade student not quite filling in the oval on a test. This is fraud,” Cordray’s filings demands $25,000 per violation.
In Congress, several leading lawmakers have called for a moratorium on foreclosure sales, and bipartisan support is growing for such a measure. The administration, however, has expressed its reluctance about a moratorium, saying a halt of all transactions would contribute to “broader harm done to the housing market and to the housing recovery.”
