Big Lenders First to Settle Foreclosures Probe: Iowa A.G.- By: Scott Zahid
According to Tom Miller, Attorney General of Iowa, the country’s five biggest lenders are most likely the first to arrive at a settlement with a multi-state team investigating foreclosure properties.
The five largest servicers of loans include Bank of America, JP Morgan Chase and Co., Citigroup Inc., Wells Fargo & Co. and Ally Financials Inc. The five may be the first to arrive at a settlement with a team of 50 Attorney Generals investigating foreclosure practices. According to Miller, the five of them cover 59% of the national market.
Miller said that they were looking at arriving at five separate agreements with the five lenders. He said that they were still ‘ways away’ from arriving at a settlement and they were looking deeply at what should constitute a settlement.
All 50 AG’s are investigating allegations of fraudulent practice of robo-signing by the lenders: where employees signed away thousands of foreclosure documents without verifying facts. The investigation was announced on October 13, after JP Morgan Chase and Ally Financials mortgage unit named GMAC announced a freeze on repossessions in 23 states having judicial foreclosures and Bank of America announced a suspension of foreclosures across the whole nation. Spokespersons for all five banks declined to comment.
The investigation has been extended to cover other mortgage practices and Attorneys General suggested a resolution of the crisis by efforts at loan modification where foreclosures are barred for those seeking loan modification and forming a fund to compensate homeowners who had been wrongfully foreclosed upon.
According to Miller, the team of AG’s had at least one face to face meeting with reps from all five major lenders and also phone calls for follow-up. The team will arrive at separate settlements rather than a general agreement. Miller said the documents were different for different lenders and settlement will be different with different lenders.
The team is not pursuing a criminal probe. Miller said their efforts were primarily to reform the servicing procedures and this is basically civil action and not criminal. Miller said the team was probing whether lenders were charging appropriate fees from borrowers. He said that many borrowers had to wait for long periods to get a response from the servicers and sometimes the servicers lose the documents of borrowers.
The 50- state team promises to be one of the best avenues to increase loan modification and accountability of the lenders. Experts say the team will act more independently than Federal regulators or Congress, due to the lobbying by industry in Washington. They say the team comes with a fresh outlook and can make necessary changes.
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