Quick update here:
Q: How many state AGs does it take to investigate allegations of mortgage fraud? A: Not sure, but 50 ought to do it.
I suppose this was inevitable, but now it is official. Attorneys general from all 50 states are going to conduct a joint investigation into allegations that employees of some lenders and mortgage servicers conducted fraudulent foreclosures and mortgage securitizations (click here for an explanation of this issue). In response to the allegations, GMAC/Ally and JP Morgan Chase suspended foreclosures in 23 judicial foreclosure states. Bank of America has suspended foreclosures nationwide. The lead investigator is Iowa AG Tom Miller, who commented:
“This is not simply about a glitch in paperwork. It’s also about some companies violating the law and many people losing their homes”.
Attorney General Richard Cordray of Ohio was even more blunt:
“What we have seen are not mere technicalities. 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”.
“The most important thing that the lenders need to recognize is the seriousness of the situation. They can’t pretend this is a fourth-grade student not quite filling in the oval on a test. This is fraud”.
What will come of these investigations remains to be seen. Neither foreclosures nor foreclosure moratoriums will be good for the housing market or the economy in general in the near term. The fallout from this mess is going to be painful for all involved. This is not even considering some of the things that could possibly occur in the mortgage backed securities markets. Felix Salmon covers some of the possibilities for Reuters here, and they are not pretty. It is going to take a looooong time and a lot of litigation to sort this out. Stay tuned…
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