Attorneys general from all 50 states and the District of Columbia announced [joint statement, PDF] Wednesday that they have formed a bipartisan group called the Mortgage Foreclosure Multistate Group (MFMG), which will be investigating allegations of procedural defects committed by mortgage loan companies during foreclosure processes. The group also includes state bank and mortgage regulators. In a joint statement, the MFMG explained its investigation will focus on "robo-signing," a process by which individuals signed affidavits and other foreclosure documents without having personal knowledge of the facts and without confirming the accuracy of supporting documentation. The group asserted that such practices "constitute a deceptive act and/or an unfair practice." The MFMG will also look into allegations that affidavits were signed without a notary public being present, which is violative of state law. The group is being led by Iowa Attorney General Tom Miller [official website] and will work to satisfy several objectives including stopping and investigating improper practices, evaluating remedies, and establishing a vehicle for independent monitoring of future practices. Miller stated [press release] that this list of objectives is not exhaustive:
These are starting points, and it's possible this group may limit, expand or change its objectives. 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 the paperwork. It's also about some companies violating the law and many people losing their homes.Investigations have already been underway in some states, and employees of several large lending companies have admitted in depositions that they failed to read documents prior to signing them [AP report]. Bank of America [corporate website] has placed a moratorium on foreclosure sales [statement] until the company has a chance to assess the accuracy of past foreclosure decisions and documentation. On Tuesday, Wells Fargo [corporate website] announced [statement] that it would not place a moratorium on sales, stating that they frequently conduct reviews of their foreclosure practices and their affidavits have been accurate.
In June, Countrywide Home Loans, Inc., a subsidiary of Bank of America, reached a $108 million settlement agreement [JURIST report] with the Federal Trade Commission (FTC) [official website] to resolve charges that the subsidiary collected excessive fees from homeowners facing foreclosure. Lenders and insurance companies have also recently come under fire for fraud relating to sub-prime mortgage exposure. Last month, a federal judge refused to dismiss a suit [JURIST report] against American International Group (AIG) [corporate website] accusing the company of fraudulent intent to mislead the market and failing to disclose to its shareholders the risks the company was taking in issuing sub-prime mortgages. In August, a federal judge rejected a $75 million settlement [JURIST reports] agreement between Citigroup [corporate website] and the US Securities and Exchange Commission (SEC) [official website] for misleading investors about the company's exposure to sub-prime mortgage-related assets. Last year, the US Senate [official website] rejected a bill [S 896 materials] that would have aided homeowners in foreclosure [JURIST report] by allowing bankruptcy judges to modify mortgages from lenders that had not already offered better terms to their borrowers.