Massachusetts filed suit against five major banks last month over deceptive foreclosure practices including such things as the “robo-signing” of documents. This could have an effect on negotiations between lenders and state prosecutors across the nation over the same issue. I’m not so sure that’s a bad thing. The Massachusetts lawsuit named Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and GMAC as Defendants. It was filed in Massachusetts by Attorney General Martha Coakley who has a history of standing up for consumers and victims of corporate abuses.
The Complaint alleges that the banks violated Massachusetts law with “unlawful and deceptive” conduct in the foreclosure process, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications. As previously reported, in the foreclosure industry, robo-signing is the practice of a bank employee signing thousands of documents and affidavits without verifying the information contained in the document or affidavit.
The filing of this lawsuit comes as settlement talks have been dragging on now for more than a year between major banks and the Attorneys General from all 50 states over fraudulent foreclosure practices that drove millions of Americans from their homes following the bursting of the housing bubble. In October of 2010, major banks temporarily suspended foreclosures following revelations of widespread fraudulent foreclosure practices by banks. The talks have been designed to institute new guidelines for mortgage lending nationwide. It was anticipated to be the biggest overhaul of a single industry since the 1998 multistate tobacco settlement.
But, over the past year, several obstacles arose. Attorneys General from different states have disagreed over what terms to offer the banks. In September, California announced it would not agree to a settlement over foreclosure abuses that state and federal officials have been working on for more than a year. Attorney General Coakley, along with Attorneys General Eric Schneiderman (New York) and Beau Biden (Delaware), have contended that banks should not be protected from future civil liability. Other states, including Kentucky, Minnesota and Nevada, have raised concerns about the extent of legal civil immunity the banks would receive as part of a settlement. All of these are legitimate concerns.
Both sides have also argued over the amount of money that should be placed in a reserve account for property owners who were improperly foreclosed upon. It has been reported that many of the larger points of the settlement, including a $25 billion cost for the banks, have been worked out, but that hasn’t been announced by the Attorneys General who are handling negotiations. The lead negotiator on behalf of state Attorneys General is Iowa Attorney General Tom Miller. Apparently, he has his work cut out for him on this project.
Source: Insurance Journal
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