Virginia to join foreclosure investigation
By Virginia Lawyers WeeklyPublished: October 12, 2010
Virginia Attorney General Ken Cuccinelli has joined 48 other state attorneys general in a multi-jurisdiction investigation of bank paperwork errors that have led banks and processing firms to suspend foreclosures across the country.
At issue is whether employees at banks and foreclosure processing firms signed court documents that had unverified or false information in an attempt to speed up the process. Cuccinelli said the joint investigation will review the practice of so-called “robo-signing” within the mortgage service industry.
“Obviously this issue affects people’s homes as well as the economy,” Cuccinelli said in a news release Wednesday. “This probe will be thorough, expeditious, and fair to both homeowners and lenders.”
Confirming Virginia’s planned participation in the investigation in Roanoke Tuesday, Cuccinelli suggested his was not a targeted investigation. “There are no accusations, no nothing yet,” he said. It’s just an investigation.”
Iowa Attorney General Tom Miller is heading up the bipartisan multistate group that will undertake a coordinated probe of potentially flawed foreclosures nationwide. Geoff Greenwood, a spokesman for Miller, said Bank of America’s decision last week to temporarily halt foreclosures nationwide showed that the industry needed to slow down.
Alabama is the only state not to join the investigation group.
Richmond lawyer Henry McLaughlin III, whose practice is devoted to foreclosure prevention, was happy to turn away some potential clients on Oct. 8 after BOA announced it was halting foreclosure sales in all 50 states.
“I have talked to a number of very happy clients who had called me about pending foreclosures” by BOA, he said. McLaughlin told several people who had consulted him that they might not need him just yet, or maybe ever, if they were facing a BOA foreclosure. His own pending cases against BOA are claims for damages, not efforts to halt foreclosures.
“I don’t think this is overall a good thing. I do think there are problems” with paperwork, and not just with BOA. McLaughlin applauds the Virginia attorney general’s interest in joining the multi-state investigation. “There’s more to be discerned about this,” he said.
JPMorgan Chase and GMAC also have halted foreclosures in the 23 states where courts review foreclosure cases. According to news reports, PNC Financial Services Group Inc. said it would halt sales of foreclosed homes for a month as it reviewed documents. On Friday, Houston-based Litton Loan Servicing LP, owned by Goldman Sachs, agreed to also halt some foreclosures.
“The mortgage industry is getting the message that this is serious, it’s wrong, and we will stop it,” Miller said in a prepared statement.
Miller said the group’s scope could expand. He said submitting foreclosure documents without verification, or with false representation, as well as signing some legal documents without notarization might violate state laws and court rules.
“These are starting points, and it’s possible this group may limit, expand or change its objectives,” Miller said. “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 paperwork. It’s also about some companies violating the law and many people losing their homes.”
In some states, including Virginia, lenders can foreclose quickly on mortgage borrowers who are delinquent. No judicial action is required. Other states — including Ohio, Connecticut, New York, New Jersey and Illinois — use a lengthy court process for foreclosures. They require documents to verify the accuracy of the loan information including who owns the mortgage.
In what has become known as “robo-signing,” some employees have admitted under oath to signing thousands of affidavits and documents without fully reading or understanding them. The affidavits verify the accuracy of the loan information, including who owns the mortgage. The practice has sparked action from officials who are concerned people have lost their homes to sloppy paperwork.
Raquel Guillory, spokeswoman for Maryland Attorney General Douglas F. Gansler, said Maryland would be part of the multi-state group to make sure the state’s residents have not been affected by the practice.
“We don’t know if there is robo-signing going on in Maryland, but there might be,” Guillory said. “Halting these foreclosures will give the banks time to figure it out.”
North Carolina Attorney General Roy Cooper launched an inquiry and sent letters to 14 lenders, including Charlotte-based Bank of America, asking the companies to suspend foreclosures in North Carolina until they can show that their affidavit procedures have been reviewed and are in compliance with the law.
“If mortgage companies are using potentially unlawful practices to push through foreclosures in North Carolina, that needs to stop,” Cooper said in a prepared statement. “Foreclosures have to happen when people don’t pay, but homeowners deserve a fair shot at keeping their homes when possible.”
Some though are concerned a widespread moratorium could have a negative impact on the economy.
White House adviser David Axelrod said Sunday the administration is pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation. Axelrod said flawed paperwork was hurting the nation’s housing market as well as lending institutions, but said there are valid foreclosures that probably should go forward because there were not problems with the documents.
Rick Sharga, a senior vice president at foreclosure listing service RealtyTrac Inc., agreed that it was easy to see where the public outcry against the banks and processing firms came from. But, he said a blanket moratorium could hinder a housing market trying to recover.
“Clearly the kinds of shortcuts they were taking were inexcusable, especially five years into this mess,” Sharga said. “It’s easy to understand the outrage, but you have to be a little careful of overreacting that could have some serious unintended consequences for the economy.
“The last thing this economy needs is a moratorium of any sort,” Sharga added. “It would be disastrous for the housing market.”
- By Ben Mook with additional reporting by Peter Vieth and Deborah Elkins
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