Thursday, October 14, 2010, 12:50 PM

If Only We Had More than 50 States….

As we previously blogged, last week North Carolina AG Roy Cooper, as well as AGs from Texas, Ohio and several other states, ordered that loan servicers hold off on foreclosure proceedings until their processes can be examined to ensure fairness to homeowners. This past Tuesday, as reported by Bloomberg and other news outlets, about 40 AGs planned to announce a joint investigation into foreclosure practices. Yesterday midday, as reported here in the Washington Post and elsewhere, 49 states’ Attorneys General announced they’re joining forces for the investigation into whether Bank of America, J.P. Morgan Chase, Ally Financial and several others made false or misleading statements in carrying out their foreclosures, focusing initially on the so-called “robo-signers.” Not surprisingly, Alabama, the 50th and final state, then joined in.

With all the political pressure, public outcry and media attention being brought to bear on the faulty foreclosure question, it’s not surprising that this investigation has spread like wildfire. The Washington Post article says that the investigation first will focus on whether the companies engaged in unfair or deceptive trade practices and that it may be used to force companies to offer additional loan modifications. Ohio’s AG Richard Cordray already has initiated one suit against GMAC Mortgage LLC and its parent for violations of the Ohio consumer practice law; at $25K per violation, being in the foreclosure business in Ohio could get pretty pricey pretty quickly. As the investigation gets rolling and more AGs consider possible suits, the servicers will no doubt quickly be peppered with requests and subpoenas. Then they’ll have the difficult task of searching for documents and responding promptly to multiple AGs’ requests for production and subpoenas with different states’ statutory requirements and laws in mind. And of course, this huge a government investigation means that the class action suits can't be far behind. On the bright side for our unemployment numbers, looks like the AGs’ offices may be doing some serious hiring over the next year or two….


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