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Coakley promises large penalties for robo-signing

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Massachusetts Attorney General Martha Coakley could not give a penalty figure for the charges she brought against the five largest mortgage servicers Thursday, but she promised "it would be a lot." During a press conference Thursday afternoon, Coakley said she told top AGs leading the multistate settlement talks that she would pursue litigation. The AGs launched their investigation into allegedly fraudulent foreclosure practices in October 2010, and Coakley said she couldn't wait any longer. "This fraud has been the subject of negotiation for over a year. I will say that when those negotiations began one year ago I was hopeful we would reach a strong and effective resolution," Coakley said. "The banks acknowledged their role in robo-signing, and I thought it was an important step. It is over a year later, and the banks have failed to provide enforceable and meaningful relief." Coakley filed a civil suit in the Superior Court Department of Suffolk County, Mass. She seeks civil penalties, restitutions and other compensation from Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), Ally Financial (GJM) and the Mortgage Electronic Registration System. The five companies service roughly 65% of all mortgages in the U.S., Coakley said. Coakley referred to the Ibanez case in Massachusetts, where the state supreme court ruled U.S. Bancorp (USB) and Wells Fargo failed to show they were the holders of the mortgage at the time of foreclosure. She said the banks listed in her suit "repeatedly failed to strictly adhere to Massachusetts statutory requirements in conducting foreclosures, and knowingly foreclosed on mortgages secured by property within the Commonwealth even though they were neither the mortgagee, nor the holder of the mortgage, at the time they initiated foreclosure proceedings." The suit also alleges the banks "falsely identified themselves" as the holder of the mortgage throughout the foreclosure process and "accordingly, each foreclosure initiated or advanced by a bank defendant when it was not the current holder of the mortgage was unlawful and is void." Coakley said at the press conference that in addition to sorting out what type of damages banks will have to pay for mishandled foreclosures, she said she is hopeful the court will help determine how these loans will be tracked in future foreclosure proceedings. The multistate AG talks were zeroing in on a possible $20 billion settlement, which would include money for principal writedowns and other relief. Iowa AG Tom Miller said the settlement negotiation was nearing a conclusion. But Coakley said signals began to arise that she wold not be getting what she thought was the best deal for Massachusetts. She informed Miller before Thursday that she would file the lawsuit. Other AGs, including in New York and California have also split off to pursue their own investigations. A Nevada grand jury brought criminal charges against two employees of Lender Processing Services (LPS) for their role in the robo-signing scandal. The banks each issued statements Thursday, complaining of the Coakley suit and expressing frustration with the splintering AGs. Coakley showed little remorse Thursday afternoon. "It was the banks that were ultimately bailed out, while homeowners and taxpayers were left on their own," Coakley said, promising she had the facts and the will to see the suit through court. "The banks have demonstrated they are too big to fail. We believe they are not too big to not obey the law." Write to Jon Prior. Follow him on Twitter @JonAPrior.

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