AG sues banks for violating foreclosure law

Nov 29, 2011 Real Estate Advice

Attorney General Martha Coakley is suing five U.S. mortgage giants for what could be hundreds of millions of dollars, claiming they “rushed to unnecessarily foreclose on (Massachusetts) homeowners without following the rule of law.”

Coakley yesterday sued Bank of America, Wells Fargo, JPMorgan Chase, Citibank and Ally Financial, alleging they broke consumer-protection laws during the housing boom and the subsequent bust.

The attorney general’s six-count filing also named the industry’s Mortgage Electronic Registration System (MERS) as a defendant.

“Whether these institutions believe that they are ‘too big to fail,’ (we) believe they are not too big to have to obey the law,” Coakley told reporters in announcing her case.

The lawsuit claims defendants:

L illegally foreclosed on hundreds or even thousands of Massachusetts homes without proper paperwork;

L lied to homeowners in trouble about whether they’d qualify for mortgage modifications;

L improperly used MERS to avoid paying big bucks in filing fees to county registries of deeds.

Coakley declined to specify how much in damages she wants, but said: “I can tell you it will be a lot of money.”

She’s also looking for banks to help people on the brink of foreclosure keep their homes.

The banking industry has admitted to some paperwork flaws, but denies actually breaking any laws.

Still, Coakley and her counterparts across the country have been talking with banks for more than a year about a possible “global” settlement said to be worth $28 billion.

Boston consumer lawyer Gary Klein, who has similar lawsuits pending against banks, said Coakley’s filing puts pressure on lenders to settle.

Klein estimated a Massachusett-only deal would cost firms hundreds of millions of dollars.

But Bank of America’s Lawrence Grayson said his firm “continues to believe that collaborative restitution rather (than) litigation will most quickly heal the housing market.”

Similar Posts:

• Bank of America Mortgage Legal Issues strengthen
• Don’t expect Fannie or Freddie to support principal reductions any time soon
• Don’t expect Fannie or Freddie to support principal reductions any time soon
• Modifications for loan payments are very hard to obtain these days.
• U.S. Foreclosure Settlement Muddies Outlook for Mortgage Relief