A 50-state task force investigating U.S. foreclosure practices may meet with lenders as early as this week, less than a month after JPMorgan Chase & Co. and Bank of America Corp. suspended some home seizures.
“We’ve had several conference calls with major lenders,” Colorado Attorney General John Suthers said in an interview, declining to specify which ones. “The banks want to sit down with the attorneys general. These meetings are being set up,” said Suthers, whose office is a member of the executive committee of the task force.
All 50 states on Oct. 13 announced a coordinated inquiry into whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The probe came after JPMorgan and Ally Financial Inc.’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America froze foreclosures nationwide.
At least 17 states, including Colorado, are conducting separate investigations to determine whether state laws were broken. Some began investigations months before the coordinated nationwide probe was announced. States have asked lenders to halt foreclosures, requested documents and sought better home- loan modification procedures. Ohio’s attorney general has sued.
“An attorney general will always have a responsibility to deal with their own state laws and statutes that they think might be violated,” said James E. Tierney, director of Columbia Law School’s National State Attorneys General Program in New York. “If the target of the investigation may have done the same thing in several states, then it becomes cost effective and more efficient to work with colleagues in several states.”
Each state has its own foreclosure laws, and the lender’s behavior may have differed from state to state or even county to county, which makes reaching a global settlement difficult, Tierney said.
“Our ability to act on behalf of consumers depends in part on the intricacies of state law,” said Janet Mills, Maine’s attorney general. “It is important for the AGs to share what they find out with each other, to monitor what is happening in other states, including the responses from financial entities,” she wrote in an e-mail yesterday.
Colorado’s Suthers said it’s too early to speculate how the probes will end.
“We are cooperating with the attorneys general on their inquiries,” Gina Proia, a spokeswoman for Detroit-based Ally, said in a phone interview yesterday. She declined to comment on any specifics or any possible meetings with attorneys general.
“The 50-state investigation is not seeking a nationwide moratorium on all foreclosures,” said Washington Attorney General Rob McKenna, who is also on the task force’s executive committee. “At the same time, foreclosures done improperly have to be corrected. It’s not permissible to violate state law to expedite a foreclosure.”
The states may push for better loan-modification procedures to address consumer complaints, McKenna said. Some homeowners who sought modifications weren’t offered revised payments, ended with the same or higher payments, or were foreclosed on during the process, according to these complaints.
“Loan modifications may be a significant part of the solution,” McKenna said. “If you keep homes out of foreclosure, they don’t depress real estate values.”
Ohio Attorney General Richard Cordray sued Ally Oct. 6, claiming its GMAC mortgage unit violated state consumer law and committed fraud by filing false affidavits in foreclosure proceedings. Cordray yesterday filed a friend-of-the-court brief in another case arguing that an Ohio court can vacate a foreclosure because of affidavit irregularities.
Maine’s Mills said she may join a class action filed against GMAC on behalf of homeowners in that state alleging abuse of process and fraud.
“We’re contemplating joining the suit or we could bring our own,” she said. Her office began investigating foreclosure practices this summer, she said.
McKenna of Washington said he doesn’t anticipate filing any lawsuits. His office began an investigation in May after receiving consumer complaints about faulty foreclosure documentation, including instances in which “the same name seemed to be signed by several different people,” he said.
“We’d prefer to settle rather than litigate,” he said. McKenna was one of the leaders in the multistate settlement with Bank of America over the mortgage practices at its Countrywide Financial unit. He said that resolution, in which homeowners received loan modifications, is a possible guide.
Greg Abbott, the Texas attorney general, has subpoenaed information and documents from nine banks or loan servicers including Bank of America, Ally and JPMorgan.
Abbott’s office sent letters on Oct. 4 to 30 loan servicers, asking them to halt foreclosures in the state, pending a review of their practices. Abbott also asked banks to identify employees who filed faulty affidavits or other documents in the state and to identify foreclosures that used such documents.
South Dakota Attorney General Marty Jackley’s office will investigate some individual complaints, he said in an interview yesterday.
“What we’re seeing nationally didn’t happen here,” Jackley said. “We just don’t see the volume” of foreclosures, compared with other states, he said.
Florida Attorney General Bill McCollum asked on Oct. 12 to meet with a group of banks, including Bank of America and JPMorgan, about their foreclosure practices. He said in an interview on Oct. 15 that he had met with JPMorgan and had a telephone conference with Bank of America. He said the two were “well on their way” to correcting problems in their foreclosure procedures.
McCollum, who sits on the executive committee of the 50- state task force, also has asked to meet with Goldman Sachs Group Inc.’s Litton Loan Servicing LP, PNC Financial Services Group Inc. and GMAC.
“We are in the process of setting up the remaining meetings,” said Shannon Knowles, who works in McCollum’s communications office. “No subpoenas have gone out to date to any of the banks,” she said yesterday in an e-mail.
“Litton Loan Servicing has been and continues to be responsive to the requests by the state attorneys general,” Donna Marie Jendritza, spokeswoman for the Houston-based company, said in an e-mail. Fred Solomon, of Pittsburgh-based PNC, declined to comment.
“The ball is now in the lenders’ court,” said Columbia’s Tierney. “The AGs have said, ‘We’re here, we’re looking.’ Some people are forthcoming and some people are not. And each lender may decide differently.”
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