Thursday, December 1, 2011
Attorney General Martha Coakley Should Be Congratulated as Massachusetts Sued Five Major Banks
Attorney General Martha Coakley should be congratulated as Massachusetts sued five major banks Thursday over deceptive foreclosure practices such as the "robo-signing" of documents, potentially undermining negotiations between lenders and state prosecutors across the nation over the same issue.
The lawsuit named Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and GMAC. It was filed in Massachusetts by Attorney General Martha Coakley.
The complaint claims 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.
The lawsuit comes as talks have been dragging on 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 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.
However, over the past year, several obstacles have arisen. Attorneys general of 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.
Coakley, along with New York Attorney General Eric Schneiderman and Delaware's Beau Biden, have argued 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.
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. Many of the larger points of the deal, including a $25 billion cost for the banks, have been worked out, according to people briefed on the internal discussions but who are not authorized to speak publicly about them.
The settlement is expected to be announced sometime this month.
The lead negotiator on behalf of state prosecutors, Iowa Attorney General Tom Miller, said in a statement that he hopes Massachusetts would join the broader settlement that's still being worked on.
"We're optimistic that we'll settle on terms that will be in the interests of Massachusetts," Miller said.