Obama Backs State Foreclosure Probe, Against Nationwide Freeze, Gibbs Says

President Barack Obama is throwing his support behind state attorneys general looking into filings of allegedly faulty home foreclosures while rejecting a nationwide freeze on home foreclosures because of potential “unintended consequences,” said a White House spokesman.

“We’re supportive of getting to the bottom of the process and insuring that these banks are following the legal process for making these decisions,” White House Press Secretary Robert Gibbs told reporters. “There are a series of unintended consequences to a broader moratorium.”

Attorneys general in about 40 states are planning a joint investigation into potentially faulty foreclosures at the largest banks and mortgage firms, according to a person with direct knowledge of the matter. The investigation may center on claims that employees at home lenders and loan servicers signed court documents without ensuring the information was accurate.

Bank of America Corp. halted foreclosures in all 50 states last week, while lenders including JPMorgan Chase & Co. and Ally Financial Inc. have stopped evictions in 23 states where courts supervise home seizures. They’re checking allegations that employees used unverified or false data to speed the process.

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.

The Senate Banking Committee plans to hold a hearing Nov. 16 to investigate mortgage servicing and foreclosure practices, according to its website.

The remarks by Gibbs reinforce comments by White House senior adviser David Axelrod, who said on CBS’s “Face the Nation” program Oct. 10 that there are valid foreclosures that ought to proceed, and the White House is urging the industry to get the situation “unwound very, very quickly.”

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net Julianna Goldman in Washington at jgoldman6@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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U.S. President Barack Obama

Joshua Roberts/Bloomberg

U.S. President Barack Obama.

U.S. President Barack Obama. Photographer: Joshua Roberts/Bloomberg

Oct. 12 (Bloomberg) -- Steve Bartlett, president and chief executive officer of the Financial Services Roundtable, discusses efforts by state attorneys general to probe filings of allegedly faulty home foreclosures and calls for a foreclosure moratorium. Bartlett, speaking from Washington with Margaret Brennan on Bloomberg Television's "InBusiness," also discusses the outlook for an overhaul of the financial regulatory system. (Source: Bloomberg)