Banks under investigation over foreclosure process
Fifty states have begun an investigation into the way lenders handled foreclosure documents. Meanwhile anger still brews. (March 2009) Credit: AP
Attorneys general in 50 states and the District of Columbia have joined to investigate whether banks and loan companies cut corners and broke the law in a rush to foreclose on home mortgages.
Initial questions have already led many companies to bring their foreclosure process to a halt. And some lawmakers are crying foul on behalf of those who have already lost homes.
What's the problem?
Homeowners may not have been treated fairly or honestly -- or lawfully -- by several big companies that took their homes in foreclosure, government officials say.
Some company workers, dubbed "robo-signers," say they signed numerous foreclosure documents without having read or verified them, as required by law. Some admit their signatures were not notarized -- also as required by law.
Key papers in some mortgages are also suspect, including so-called "lost-note" affidavits -- a sworn statement that a title deed or other document has been lost. A key allegation is that banks failed to establish clear title to properties during the foreclosure process. And some documents were never even physically filed at county and city clerk offices.
What is being done?
Government lawyers and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly. They want to fix any problems. Which banks and loan companies are affected?
Customers of Ally Financial Inc.'s GMAC Mortgage Unit, Bank of America and JPMorgan Chase & Co., may already have been victim to improper practices. JPMorgan Chase and GMAC Mortgage have mortgage foreclosure moratoria in dozens of states, including New York. Bank of America has stopped foreclosures in all 50 states.
Citigroup Inc. and Wells Fargo & Co., and others, say they've done no wrong and have not stopped their foreclosures.
Could the investigation help anyone?
Possibly it could aid some of the estimated 3.3 million families whose homes may be lost to foreclosure or distressed sale. The extra time might help them keep their homes.
Could it hurt anyone?
Yes, it could worsen the real-estate market slowdown if homes are stuck partway through the foreclosure process. It could also harm those who want to just get rid of the burden of a home mortgage through foreclosure.
