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The report begins: "A joint investigation by every state and the District of Columbia could force mortgage companies to settle allegations that they used flawed documents to foreclose on hundreds of thousands of homeowners."

Friends and supporters gather around Rosemary Williams of Minneapolis, Minnesota, as police remove her from the house her father built in 1944. Four protesters were arrested, 09/11/09. (photo: Madeleine Baran/MPR)
Friends and supporters gather around Rosemary Williams of Minneapolis, Minnesota, as police remove her from the house her father built in 1944. Four protesters were arrested, 09/11/09. (photo: Madeleine Baran/MPR)


Officials in All 50 States Launch
Foreclosure Probe

By Alan Zibel, AP Real Estate Writer

13 October 10

joint investigation by every state and the District of Columbia could force mortgage companies to settle allegations that they used flawed documents to foreclose on hundreds of thousands of homeowners.

It could take months, at least, for any settlement to be reached. But legal experts say lenders could be forced to accept an independent monitor to ensure they follow state foreclosure laws. The banks could also be subject to financial penalties and be forced to pay some people whose foreclosures were improperly handled.

For banks, "the most efficient way for them to get out from under this is to settle across the board," said Kathleen Engel, a law professor at Suffolk University in Boston.

Employees of several major lenders have acknowledged in depositions that they signed thousands of foreclosure documents without reading them as required by state laws.

"This is not simply about a glitch in paperwork," Iowa Attorney General Tom Miller, who's leading the probe announced Wednesday, said in a statement. "It's also about some companies violating the law and many people losing their homes."

At a news conference, Miller said the states might be open to alternatives to financial penalties for the banks. They might, for example, agree instead to have lenders step up their efforts to help people reduce their loan payments so they can avoid foreclosure.

The document problems could prolong the housing downturn if many home buyers become unwilling to purchase foreclosed homes. But for a few months anyway, the problems could help prop up prices, because fewer low-priced foreclosed homes will be for sale.

Analysts don't expect many people who lost homes to foreclosure to recover them.

The industry has begun to respond to pressure from state and federal officials. JPMorgan Chase & Co. said Wednesday it would extend its review of its foreclosure cases to 41 states - doubling the number of its cases under review to 115,000. JPMorgan had previously said it was halting foreclosures in the 23 states where foreclosures must be approved by a judge.

This week, GMAC Mortgage, a unit of Ally Financial Inc., said it had hired legal and accounting firms to review its foreclosure procedures in all 50 states. GMAC has halted some foreclosures in 23 states. Bank of America has done so in all 50.

And Wells Fargo & Co. has said it would review pending foreclosures for potential defects. Wells says it's discovered no problems.

In their announcement Wednesday, the state officials said they would review evidence that documents were signed by mortgage company employees who didn't verify the information in them. They also said many documents appeared to have been signed without a notary public witnessing that signature - a violation of state law.

Attorneys general have taken the lead in responding to the revelations. State officials, not the federal government, enforce foreclosure laws, which vary by state.

Not all attorneys general have identical powers to investigate. Without clear evidence of a crime, they usually file lawsuits to force businesses to stop actions or to pay damages to wronged consumers.

The filing of false documents in court can be prosecuted as perjury. Any lawyers involved in improper foreclosures could suffer sanctions or lose their law licenses for unethical activity.

As part of their probe, state officials will be able to issue subpoenas to extract potentially incriminating documents from the industry. Such evidence could be used in lawsuits or to force settlements with lenders.

A key question is whether state investigators can persuade bank employees to divulge some of the industry's secrets, said Ray Brescia, an Albany Law School professor who has tracked the mortgage crisis. Some mortgage company workers could have a powerful incentive to do so rather than face criminal charges, he noted.

"It's quite possible that there will be insiders who come forward to reveal the inner workings of these "boiler room" foreclosure mills, which likely won't be good for the banks," Brescia said.

A lawsuit that Ohio Attorney General Richard Cordray filed this month against GMAC Mortgage and Ally Financial could preview things to come around the country.

Cordray's lawsuit seeks to halt potentially illegal foreclosure practices. It also asks that a judge stop sales of any foreclosed homes involving paperwork filed by a GMAC employee who signed hundreds of faulty documents. And it aims to toss out foreclosure judgments on homes that haven't yet sold.

The Ohio lawsuit also seeks damages for consumers and civil penalties of $25,000 for each separate violation. If similar cases were brought in all 50 states, it could total billions of dollars in damages and fines for lenders and others involved in foreclosures.

The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.

Kendall Coffey, a former U.S. attorney in Miami, said that fixing faulty or fraudulent mortgage paperwork can be relatively easy if a case is ongoing. But it's far more complex if a foreclosure has been completed and the home already sold.

There also are limits to what officials in some states can do.

For example, in Florida, an epicenter for foreclosure cases, Attorney General Bill McCollum suffered a setback last week in a probe into practices by four law firms that handled foreclosures. A judge ruled that McCollum had no authority to subpoena records from one firm. It said the state's bar association was the proper forum to decide whether to sanction the firm.

A different Florida firm involved in that investigation, the Law Offices of David J. Stern, is seeking a similar ruling. Government-controlled mortgage buyers Fannie Mae and Freddie Mac have stopped referring foreclosures to Stern's firm while they review the firm's filings.

Also Wednesday, federal regulators said all mortgage companies that work with Fannie and Freddie will have to review foreclosure documents and refile them if they spot problems. That will affect most of the industry, because Fannie and Freddie own or guarantee about half the nation's home loans.

In cases where no problems turn up, foreclosures "should proceed without delay," the Federal Housing Finance Agency, the agency that regulates Fannie and Freddie, said. your social media marketing partner


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+6 # JJ 2010-10-13 22:33
So, banks didn't bother to read or fill out foreclosure paperwork properly?

Too big to fail.
+6 # Me-Again 2010-10-13 23:30
Quoting JJ:
So, banks didn't bother to read or fill out foreclosure paperwork properly?

Too big to fail.

No, banks know that "Too big to fail = Too big to be held accountable." And the majority of persons foreclosed upon are intimidated. When 8 states AG accept settlements that average 3 Million per state to cease criminal/fraud or other investigations before charges are brought, something is wrong. Banks know the fine print and very few victims of their misdeeds have recourse when AG dismisses investigations for settlements.
+2 # Hors-D-whores 2010-10-14 00:26
Too BIG to stand!??!?
+7 # Pete Hart 2010-10-14 07:22
The issue is not whether they bothered to read documents or complete them properly, but that with the complex chain of re-selling mortgages, lenders no longer have any proof that they actually have a legal lien on many properties (if not most). Filing foreclosure paperwork when you don't have the required documentation is fraud. The foreclosure mills should be shut down and attorneys disbarred and jailed. This is what a #%!&@ed up free market gets you!
+2 # bjw 2010-10-14 13:59
Too big to fail and too many to jail.

No country is immune to greed and corruption. When it reaches critical mass, you get a meltdown and most do not recover for generations if ever. We have not even begun to recognize the severity and depth of the problem. We do not have the tools or instruments to clean out and clean up.
+2 # Howard G. Johnson 2010-10-13 23:14
Thats all very fine if the house or property was taken in a state requiring a judge in a foreclosure, how about states like California where the majority of mortgages are by trust deed and there is no judge in the picture. Bank=Beneficiar y, home owner=trustor and title holder for the benefit of the lender=trustee?
+10 # KMC 2010-10-13 23:14
These large banks got TRILLIONS OF DOLLARS IN BAILOUTS PAID FOR BY US TAXPAYERS, yet their CEOs took home MILLIONS IN BONUSES for artificially pumping up their profits with these SHADY MORTGAGE REFIs.
+2 # JayMagoo 2010-10-14 05:26
I don't expect to see a lot of bankers being held responsible -- they will still get their million dollar bonuses. And as usual, the little guy, who was stampeded into an adjustable rate mortgage and given no alternative, will still lose his home. It will just take a little longer. When one banker goes to jail, it's big news. When hundreds of thousands lose their homes -- ho-hum. Business as usual. Call me a cynic -- ok, I'm a cynic.
+6 # TomTomTom 2010-10-14 05:58
While it's being sorted out. someone needs to write about "private mortgage insurance" which was there to protect the lenders; if understand it right, many lenders will be paid on the back end anyway, unless of course the insurers fail also.

Also someone please write about the title insurance situation on a foreclosed house. As long as the foreclosure is cloudy, who would but one of these homes?

The banking industry, or parts of it, caused not only this housing mess but the entire recession. We are not sympathetic.
+1 # Diane 2010-10-14 08:13
Actually,the mortgage insurers are not for the lenders;they don't want to have to pay up if the homes they insure default/foreclo se. I know from personal experience, as mine volunteered to mediate for a loan modification on my behalf.They also want to know about loan/foreclosur e fraud, as this cancels their obligation to pay up.
+2 # Willard Wheelock 2010-10-14 06:49
Just another symptom of the thoroughly corrupt system we have been victimized by for decades. These are the same banksters who brought on the crash and resulting depression of the 30's and the same Repuglican party that worked hand in hand with them. Hopfully the voters will not be so upset about the lagging reform efforts that they will surrender what is left of our country to these same fascist vultures. Remember Germany in 1933 and beware!
+3 # restore2america 2010-10-14 07:52
Banks, Mortgage Companies and Realtors are financial criminals operating under the sanction of the Federal government with complicity from the State governments. The Federal Government does not care - they just print money to keep going. States cannot do that. Foreclosures = loss of tax revenue and collapsing State economies. States will be the ones who have to act. The bigger question arises at the limit of State willpower. When will the People have to take over - and how? 2.4 million stolen homes, most based on fraudulent and illegal mortgages? We the People will be left to dig out the root of the problem because no government will have the guts to defend our property, rights and lives.
+5 # JerryC 2010-10-14 08:26
Fraud going into the deal and fraud going out. It's sickens me to think that the banksters can afford to outgun all the AG's with high priced law firms that will prolong and diffuse investigations until the state AG's best option is to settle. Justice is blind to the sins of the rich.
+5 # John W Greenwood Jr 2010-10-14 08:55
One Nation under God indivisible with liberty and justice for all. Good words when is our country going to abide by it's own words. This does not look to me like the road toward the brotherhood of mankind. We have seen how the conservatives let these banks run all over our citizens. We complain about the banks. The banks are going to do what ever they can to improve their bottom line, that is what banks do. It is like getting angry with a dog for barking. It is the so called conservatives that open the doors for this to happen and take their cash reward for doing so. They call themselves conservative Christians. I say the term conservative Christian is an oxymoron. A Christian is one that believes in the brotherhood of mankind, this is not the goal of the conservative.
+2 # DaveW. 2010-10-14 09:39
John W Greenwood Jr. We expect "fair and just" behavior because people call themselves "Christians." Mistake number one. We expect "fair and just behavior" from our elected Reps. because they "say" they are ethical. Mistake number two. We expect people to act in a manner consistent with common decency in a "civilized society." Mistake number three. Three strikes and your out. We've been "out", at least many of us, from the get go. Why yell at the "barking dog?" He's only doing what comes natural.
+1 # snookie 2010-10-14 18:22
Bernard probably should come forward with evidence, I hope he can help himself, join mankind. He's been into many wrongs, for many years, if some truths are exposed to the public about the finance path, housing, is just a start again, oil should still not slide. Tell the truth. Thank God, not the cash.
+5 # amyemoore 2010-10-14 09:52
Same people who screwed our economy starting in 2007 and took our money never got put in jail and thats why they are now stealing peoples homes by foreclosure! And guess what? It sounds like they will still not get put in prison! Oh, they may have to settle? The richest banks in the world might have to pay a few bucks! They are not rich by accident, but by criminality!
+3 # Mario 2010-10-14 15:45
Break up the Banks into small community owned banks! Make the banks accountable to the communities they are supposed to serve. Take our power back!

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