Attorneys general in about 40 states may announce by next week a joint investigation into potentially faulty foreclosures at the largest banks and mortgage firms, according to a person with direct knowledge of the matter.
State attorneys general led by Iowa’s Tom Miller are in talks that may lead to the announcement of a coordinated probe as soon as Oct. 12, said the person, who asked not to be named because an agreement wasn’t completed. The number of states may change because several are deciding whether to join, the person said. New Mexico Attorney General Gary King said yesterday in a statement that his office will join a multi-state effort.
Lawyers representing the banks expect a widening investigation, according to Patrick McManemin, a partner at Patton Boggs LLP, a Washington-based law firm that represents banks, loan servicers and financial institutions. Bank of America Corp., the biggest U.S. lender, yesterday extended a freeze on foreclosures to all 50 states.
“We are aware of or involved in a large number of investigations that lead us to believe there are in the neighborhood of 40 state attorneys general who have initiated investigations or expressed an interest,” McManemin said in a telephone interview.
Officials in at least seven states have already announced probes into claims that employees at home lenders and loan servicers signed court documents without ensuring the information was accurate. On Oct. 7, Miller said in a statement that he was working with state officials, banking regulators and the U.S. Justice Department to launch a coordinated review. Attorneys general in Ohio and Connecticut have said some of the practices may amount to fraud.
The Senate Banking Committee plans to hold a hearing Nov. 16 to investigate mortgage servicing and foreclosure practices, according to its website.
“American families should not have to worry about losing their homes to sloppy bureaucratic mismanagement or fraud,” the panel’s chairman, Connecticut Democrat Christopher Dodd, said in a statement. “Regulators at the federal, state and local levels have a responsibility to uphold the law and protect consumers from unfair foreclosure.”
Bank of America, JPMorgan Chase & Co. and Ally Financial Inc. already froze foreclosures in 23 states where courts supervise home seizures, amid allegations that employees used unverified or false data to speed the process. Litton Loan Servicing LP, a mortgage-servicing business owned by Goldman Sachs Group Inc., said yesterday it’s halting some foreclosures to review how they’re handled.
Senate Majority Leader Harry Reid, a Democrat from Nevada, called on other banks and mortgage firms to follow Bank of America’s lead and “review their practices to ensure that they are not unfairly targeting homeowners in Nevada and across the nation,” according to a statement yesterday.
“There are reasons for these procedures and those are to make sure the banks own the homes they are foreclosing on,” Robert Lawless, a professor at the University of Illinois College of Law in Champaign, said in a telephone interview. “At the same time I don’t think it is going to be a tidal wave of relief for homeowners. My bet is that there will be a delay.”
Vickee Adams, a spokeswoman for San Francisco-based Wells Fargo & Co., and Mark Rodgers, a spokesman for New York-based Citigroup Inc., said the companies were still processing foreclosures. Thomas Kelly, a spokesman for New York-based JPMorgan, and Gina Proia, spokeswoman for Detroit-based Ally, declined to comment.
Lenders took possession of a record 95,364 homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, California-based data vendor.
“If you have a national moratorium on foreclosures, that’s a problem,” Paul Miller, an analyst for FBR Capital Markets Corp. in Arlington, Virginia, said in a phone interview. “The longer you drag out foreclosures the longer it takes to get through” the housing slump, he said.