The investigation by attorneys general in 50 U.S. states into banks’ foreclosure practices is on “a fast track” and any resolution might involve multiple settlements, Iowa Attorney General Tom Miller said.
“We’d like to resolve this sooner rather than later,” Miller, who is leading the attorneys general task force, said in an interview. “We want to move quickly if we can, but not so quickly that we don’t do it right.”
A global settlement of the task force investigation is unlikely, said Miller, 66, who also leads a separate foreclosure prevention group of state attorneys general. “It would be one bank at a time.” Miller, who was first elected attorney general in 1978 and whose successes include $809 million from two earlier settlements over home loans, didn’t speculate on when or how this investigation might be resolved.
All 50 states on Oct. 13 announced the 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 Chase & Co. 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 Corp. froze foreclosures nationwide.
At least 19 states, including Iowa and Texas, 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 sued, accusing Ally Financial of consumer fraud.
Some lenders have acknowledged that employees may have completed court affidavits without confirming their accuracy. In December, a GMAC employee said in a deposition in a foreclosure case in West Palm Beach, Florida, that his team of 13 people signed about 10,000 documents a month without verifying the accuracy of the information in them.
“One bank at a time is logical,” said Bernard Nash, a lawyer at Dickstein Shapiro LLP in Washington and head of the firm’s practice group that represents corporations in dealings with state legal officials. “Everyone has their own interest, their own judgment on what a good deal is.”
Initial settlements with individual banks may be less than comprehensive, resolving one or some issues at a time, said Nash, who isn’t involved in the foreclosure matter. “The issues they have to come to grips with are so complicated, this might require piecemeal settlements.”
The attorneys general and their deputies on the 50-state task force have begun talking to the banks, Miller said. They’ve had one face-to-face meeting with a bank, he said. He declined to disclose which bank.
Miller’s position as the leader of the 50-state group was a “natural evolution” of his prior investigations into mortgage and foreclosure practices, he said in the Nov. 8 phone interview. “I was lead attorney general in the Household case, lead attorney general in Ameriquest and in the state foreclosure prevention group.”
In 2002, Household Finance agreed to pay $484 million to consumers to settle a 50-state investigation over home loan practices. Ameriquest Mortgage Co. reached a $325 million settlement with the attorneys general in 2006 to resolve claims the lender cheated customers by misrepresenting loan terms and getting inflated appraisals.
Miller, who spent four years in private practice at a law firm in Des Moines in the 1990s, was elected to an eighth four- year term as attorney general on Nov. 2.
Miller was born in Dubuque, Iowa, where his father was the county assessor. After graduating from Harvard Law School in 1969, he served as a VISTA volunteer in the inner city of Baltimore for two years. Volunteers in Service to America, a federally financed anti-poverty organization, was often called the domestic Peace Corps.
“It was entirely consistent with my goal of having a career in public service,” he said. “It gave me a perspective on low-income people and their struggles.”
Miller has focused on consumer protection while attorney general. “The attorney general should use the law to forward the interests of ordinary Iowans,” he said.
This is particularly necessary when protecting homeowners, he said. “The home is more than just an economic asset.”
Nash of Dickstein Shapiro calls Miller the “dean” of attorneys general.
“He’s respected by both Democrats and Republicans,” Nash said. “His judgment carries a lot of weight.”
When the number of foreclosures escalated in 2007, Miller’s office set up a hotline, joining with the Iowa Mediation Service, the Iowa Finance Authority and several nonprofit groups, to help consumers keep their homes, he said. This helped Iowa bring its foreclosure rate down to the sixth-lowest in the U.S. from about 26th, he said.
Current foreclosure problems go deeper than “robosigning” allegations and predate the recent disclosures, Miller said. “We’ve been concerned about this for 3 1/2 years.”
When the “foreclosure avalanche” started in 2007, Miller and other attorneys general formed the foreclosure prevention working group, with more than 30 states involved. Members of the 13-state executive committee then began talking with servicers to increase the number of loan modifications, he said.
“When we first started talking to the servicers, the problems were perceived to be that they weren’t putting enough resources into this,” Miller said. “You need a lot more resources to modify loans. It’s a culture thing. They were in the business of collecting, not in the business of finding a better deal” for consumers, he said.
“Servicers still have quite a ways to go,” he said. “They haven’t staffed up enough. People still wait months. Paperwork is lost.”
An agreement resolving the 50-state probe may address this problem, Miller said. “Servicers would have to commit more resources,” he said. The agreement would require that “they would fully fund this.”
Improved loan modification procedures, including additional modifications, might also be part of any agreement, he said.
California, New York
As part of its probe, the 50-state group established an executive committee of top legal officers from 12 states, including California, Iowa, New York, Illinois and Texas, and the banking regulators of Maryland, New York and Pennsylvania. Delaware Attorney General Beau Biden was later added to the executive committee.
Most negotiations by the group will be conducted by the executive committee or deputies within their offices. “The members meet usually by phone,” Miller said. “It’s very informal, somewhat ad hoc.”
The group won’t hold public hearings to question bank executives or employees, he said.
Six of the attorneys general on the executive committee will be leaving office. Richard Blumenthal of Connecticut was elected to the U.S. Senate. Jerry Brown of California and Andrew Cuomo of New York were elected governor of their states last week while Arizona’s Terry Goddard lost his bid for governor. Ohio’s Richard Cordray was defeated for re-election. Florida’s Bill McCollum also is leaving office.
“I don’t think there’ll be any substantial effect,” Miller said. “We’re responsible public officials.”
New attorneys general will have the option to stay on the executive committee. “The effort will go ahead,” he said. “This is on a fast track.”
One primary goal, he said: “We have to figure out a way this never happens again.”
To contact the editor responsible for this story: David E. Rovella at firstname.lastname@example.org.