Prosecutors in all 50 U.S. states have formed a bipartisan group to investigate banks and mortgage lenders, and review practices of “robo-signings” in the mortgage servicing industry stemming from allegations related to improprieties during foreclosures. Iowa Attorney General Tom Miller is leading the investigation on whether mortgage servicers have improperly submitted documents in support of foreclosures.
The group will investigate whether lenders misrepresented proof of ownership and other legal details on affidavits and other documents they file during the course of the legal paperwork required to complete foreclosures on mortgages in default. Investigators will also attempt to determine whether companies, including lenders and the attorneys who represent them signed affidavits outside the presence of a notary public, along with other possible illegal actions related to servicing irregularities or abuses.
“This group has the backing of nearly every state in the nation to get to the bottom of this foreclosure mess, and we plan to work together as thoroughly and expeditiously as possible,” said Iowa Attorney General Tom Miller. “Since this issue affects peoples’ homes and has clear economic implications, this probe and its outcome need to be fair both to homeowners and also to lenders.”
Submitting foreclosure documents without legal ownership verification, false representations or signing some legal documents outside the presence of a notary public may constitute deceptive acts or unfair practices violating state laws. A series of lawsuits filed in more than 15 states charging illegal foreclosure actions are awaiting hearings.
The multistate group will contact a “comprehensive list” of mortgage servicers to investigate allegations of improprieties to put an “immediate stop to improper mortgage foreclosure practices,” according to a statement released by the group. Prosecutors will review past and present practices by mortgage servicers, including Bank of America, which has voluntarily frozen foreclosures in all 50 states. BofA took over troubled Countrywide Mortgage at the height of the financial crisis and may have the highest number of troubled mortgages in the U.S., according to industry analysts.
“It has recently come to light that a number of mortgage loan servicers have submitted affidavits or signed other documents in support of either a judicial or non-judicial foreclosure that appear to have procedural defects,” said the National Association of Attorneys General in a prepared statement. “It appears affidavits and other documents have been signed by persons who did not have personal knowledge of the facts asserted in the documents.
“It appears that many affidavits were signed outside of the presence of a notary public, contrary to state law. This process of signing documents without confirming their accuracy has come to be known as “robo-signing.” We believe such a process may constitute a deceptive act and or an unfair practice or otherwise violate state laws.”
Foreclosures have been halted in 23 states as a result of the actions and other charges stemming from allegations related to possible illegal foreclosures by three other lenders. A foreclosure freeze in all 50 states is not likely just weeks ahead of critical mid-term elections that could determine the balance of power in Congress.
“These are starting points, and it’s possible this group may limit, expand or change its objectives,” said Miller. “What’s important here is this is a cooperative and coordinated effort by states to address a serious problem. This is not simply about a glitch in paperwork. It’s also about some companies violating the law and many people losing their homes.”