AGs Launch Nationwide Foreclosure Investigation

The attorneys general of all 50 states announced an investigation into all major loan servicers across the country and their foreclosure filings over deepening concerns that foreclosures were handled improperly on Wednesday.

Statements from state investigators said the initial focus will be on whether industry employees — so-called “robo-signers” — signed off on thousands of foreclosures every month without reviewing the files as legally required.

In courts throughout the nation, homeowner attorneys have alleged that lenders forged signatures and improperly notarized documents in the rush to foreclose on homeowners. “Banks blatantly broke the law, papering the courts with defective documents to railroad consumers into fast, possibly fraudulent foreclosures,” Connecticut Attorney general Richard Blumenthal said in a statement. “At the best, banks engaged in careless negligence, at worst, outright fraud.”

Such practices might have violated laws against unfair and deceptive trade practices, which could result in civil penalties, according to investigators.

“This is the clearest signal yet to the major mortgage lenders and servicers that they need to take serious measures to fix problems with affidavits,” said Ohio Attorney General Richard Cordray, who recently filed the nation’s first lawsuit against a mortgage servicer over allegedly fraudulent affidavits. “What we have seen are not mere technicalities, as some suggest; rather, this is about the private property rights of homeowners facing foreclosure and the integrity of our court system, which cannot enter judgments based on fraudulent evidence.”

On Sunday, Federal Housing Administration Commissioner David Stevens told the Washington Post by email that the administration was not in favor of suspending foreclosures nationwide.

“We believe freezing foreclosures for all banks in all states, whether we have reason to believe them to be in error or not, is simply not the prudent step to take in this fragile housing market,” he said.  “While we understand the eagerness to make sure that no American is foreclosed upon in error, we must be careful not to over-reach and apply a remedy that will make the underlying problem of foreclosures worse.”

Attorneys General in 50 States Open Foreclosure Investigation

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