Four States’ Lawyers Announce New Foreclosure Probe Actions
California Attorney General Kamala Harris. Photographer: Kevin Winter/Getty Images
Illinois Attorney General Lisa Madigan
Brendan Hoffman/Bloomberg
Illinois Attorney General Lisa Madigan.
Illinois Attorney General Lisa Madigan. Photographer: Brendan Hoffman/Bloomberg
The attorneys general of four states including Illinois and California announced new demands in their probes of foreclosure practices by banks and the mortgage- servicing industry.
California Attorney General Kamala Harris said today she subpoenaed Lender Processing Services Inc. (LPS) as part of her investigation into so-called “robo-signing,” the practice signing foreclosure documents without verifying their accuracy.
Illinois Attorney General Lisa Madigan is issuing subpoenas to Lender Processing and Nationwide Title Clearing Inc., another Florida-based company, she said today.
“Foreclosure became a rubber-stamping operation that robbed many homeowners of the American dream without a fair and accurate process,” Madigan said in a statement. “California homeowners have been exposed to fraud and crime at every step of the mortgage process,” Harris said in a separate statement.
The subpoena announcements come a day after attorneys general in the 50-state investigation of foreclosure practices met with representatives from the five largest U.S. banks.
State legal officers at the meeting told the banks they will face an estimated $17 billion in claims if the inquiries result in civil lawsuits, according to a person with knowledge of the talks.
Bank Negotiators
Negotiators for the banks said they are prepared to dispute such demands in court, said the person, who asked to remain anonymous because the discussions aren’t public. The attorneys general and federal officials are negotiating with the five largest loan servicers, Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Wells Fargo & Co. (WFC) and Ally Financial Inc.
Michelle Kersch, a spokeswoman for Lender Processing Services, based in Jacksonville, Florida, didn’t immediately return a call for comment.
“Nationwide Title Clearing has not yet been served a subpoena from the Illinois attorney general and therefore cannot comment on the specifics at this time,” Cassandra McSparin, spokeswoman for Palm Harbor, Florida-based company, said in an e-mailed statement. “The company intends to cooperate with the Attorney General’s office to the fullest extent of the law.”
Nationwide’s mortgage assignment documents and procedures have been “thoroughly audited and examined for accuracy,” McSparin said.
Many of the states are conducting probes of foreclosure practices independent of the 50-state probe.
New York, California
New York Attorney General Eric Schneiderman is investigating banks’ mortgage securitizations, and California’s Harris announced May 23 that she has established a mortgage fraud task force.
Two others states -- Utah and Connecticut -- this month sent letters to Charlotte, North Carolina-based Bank of America complaining of illegal or inadequate practices.
Utah’s attorney general wrote a letter to Bank of America, claiming its ReconTrust Co. unit isn’t meeting legal requirements for conducting home foreclosures. The letter to Bank of America Chief Executive Officer Brian Moynihan, dated May 19, was released today by Utah Attorney General Mark Shurtleff’s office.
“All real estate foreclosures conducted by ReconTrust in the state of Utah are not in compliance with Utah’s statutes, and are hence illegal,” Shurtleff wrote. ReconTrust must be a member of the state bar or a title insurance company to conduct its foreclosures, according to the attorney general.
‘Every Effort’
“ReconTrust will continue to handle foreclosures in compliance with applicable laws,” Jumana Bauwens, a spokeswoman for Bank of America, said in an e-mail. “Bank of America makes every effort to reach out to delinquent customers to offer home retention options as well as foreclosure avoidance programs. Foreclosure is always our last resort.”
Connecticut Attorney General George Jepsen said Bank of America, the biggest U.S. bank by assets, “is failing to devote adequate resources” to its mortgage-servicing business in the state, according to a May 20 letter released by his office today.
Mortgage borrowers seeking help are experiencing “significant difficulties” with the bank, according to the letter. Jepsen is helping to lead settlement negotiations with mortgage servicers as part of the 50-state investigation.
“Despite having had more than two years to ‘right-size’ your staff and establish effective procedures and systems, Bank of America has so far not prevented even the most common consumer complaints,” Jepsen wrote to Moynihan.
Jepsen Meeting
Bank of America officials recently met with Jepsen to discuss “mortgage-related concerns,” T.J. Crawford, a company representative, said in an e-mail. The bank has worked with local governments and counseling organizations in the state to educate homeowners, according to Crawford.
“Since January of 2009, we have expanded the staffing level in default servicing three-fold, and approximately 30,000 are now dedicated to this area,” Crawford said.
The California attorney general’s subpoena requires Lender Processing Services to produce documents and provide written answers to questions covering actions starting Jan. 1, 2007, according to the statement by her office.
Madigan said she will investigate reported allegations that Lender Processing Services and Nationwide Title Clearing engaged in robo-signing and would include a “complete review of the accuracy of the systems and services” they supply to large lenders.
Lender Processing
Lender Processing provides loan servicing support for more than 50 percent of all U.S. mortgages, with a principal balance of more than $4.5 trillion, Madigan said. Nationwide provides services to eight of the top 10 lenders and servicers in the U.S., she said.
“Nationwide is not a foreclosure services company and does not prepare foreclosure specific affidavits, such as those to evict people from their homes, and has never done so,” McSparin, the spokeswoman, said. “We have every reason to believe that this issue will be short-lived and will be quickly resolved.
To contact the reporters on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net; Dawn Kopecki in New York at dkopecki@bloomberg.net; Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net;
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net;
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