Massachusetts' top law enforcement official has sued five top U.S. banks, charging they foreclosed illegally on homes in the state and used deceptive loan servicing practices, including robo-signing.
Attorney General Martha Coakley filed suit against Bank of America, Wells Fargo, JP Morgan Chase, Citigroup and GMAC.
“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” Coakley said in a statement. “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”
Coakley's 59-page complaint alleges that the five banks violated Massachusetts law by using fraudulent documentation, including "robo-signing," foreclosing without holding the actual mortgage and failing to uphold loan modification promises to homeowners in the state.
The 50 state attorneys general had been trying to negotiate a settlement with mortgage lenders over what they said were deceptive practices that helped contribute to the collapse of the housing market. But the talks have been stalled over which practices would be covered by any agreement and how much the banks would pay.
The talks hit a major roadblock in September when California Attorney General Kamala Harris abandoned the effort, saying the banks weren't offering enough to provide relief for homeowners. Attorneys General in Delaware, Nevada and New York have also expressed reservations about a broad settlement until they can complete a more through investigation of improper mortgage lending practices.
In April, 2011, the Office of the Comptroller of the Currency, which regulates national banks, issued a report after reviewing foreclosure practices at eight of the largest mortgage servicers. The report cited "inadequate policies, procedures, and independent control infrastructure covering all aspects of the foreclosure process."
The OCC ordered the companies to take steps to correct "inadequate quality control and audit reviews to ensure compliance with legal requirements, policies and procedures," inadequate organization and staffing, "foreclosure documents ... executed under oath, when no oath was administered," and "notary practices which failed to conform to state legal requirements."
“Attorney General Coakley informed me of her decision to file lawsuits against the banks. She also indicated that she’ll evaluate the joint state-federal settlement we’re negotiating, which we hope to reach soon. Attorney General Coakley indicates that she is open to joining our settlement effort if the terms adequately address the needs of the people of Massachusetts. We’re optimistic that we’ll settle on terms that will be in the interests of Massachusetts,” Iowa Attorney General Tom Miller said.
Wells Fargo CEO John Stumpf told CNBC that despite the lawsuit he still thinks it would be better to come to an agreement with the AGs out of court. "I haven't seen the complaint, but I'm disappointed," he said.
John Stumpf, the CEO of Wells Fargo, addresses the a new lawsuit by the state of Massachussetts' AG. The firm is one of the banks targeted in the lawsuit.