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Officials’ goal: Fix mortgage industry (UPDATE)

A sign lies on the ground in front of a foreclosed home in Homestead, Fla. Officials in 50 states have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners. (AP File Photo/J Pat Carter)

A sign lies on the ground in front of a foreclosed home in Homestead, Fla., recently. Officials in 50 states have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners. (AP File Photo/J Pat Carter)

By Alan Zibel
AP Real Estate Writer

Washington — Officials in 50 states and the District of Columbia have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.

As part of the national investigation, Wisconsin Attorney General J. B. Van Hollen asked three lenders doing business in the state to provide information.

In letters to Ally Financial Inc., JP Morgan Chase & Co. and Bank of America, Van Hollen requested the number of foreclosures filed since 2005, the number of actions in Wisconsin that are on hold, the case numbers of foreclosures placed on hold and how they will be handled, the identities of all individuals who signed affidavits for the lenders, the names of law firms that pursued foreclosures, a description of how the lenders intend to correct the problems and what action the lenders will take to make sure future documents comply with state laws.

The letters noted that signing affidavits submitted to the court could be a violation of criminal and civil laws including fraudulent misrepresentation, slander of title, false swearing and obstruction of justice. The letters also noted that lawyers who misrepresented evidence in court hearings could be found to be in contempt.

The states’ attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly.

Alabama initially did not sign on to the investigation. It reversed course after the joint statement was released.

Attorneys general have taken the lead in responding to a nationwide scandal that has called into question the accuracy and legitimacy of documents that lenders relied on to evict people from the homes. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them.

The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. Some foreclosures could be overturned. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.

The state officials said they intend to use their investigation to fix the problems that surfaced in the mortgage industry.

“This is not simply about a glitch in paperwork,” said Iowa Attorney General Tom Miller, who is leading the investigation. “It’s also about some companies violating the law and many people losing their homes.”

Ally Financial’s GMAC Mortgage unit, Bank of America and JPMorgan Chase already have halted some questionable foreclosures. On Wednesday, JPMorgan Chase officials said the bank was expanding its review of foreclosures to 41 states. Chief Financial Officer Douglas Braunstein said the bank was now reviewing about 115,000 foreclosure cases, up from 56,000.

Other banks, including Citigroup Inc. and Wells Fargo & Co. have not stopped processing foreclosures, saying they did nothing wrong.

According to a joint statement attributed to the officials, they plan to review evidence that legal documents were signed by mortgage company employees who did not have personal knowledge of the facts asserted in the documents. Many of those documents appear to have been signed without a notary public witnessing that signature — a violation of most state laws, according to the statement.

“What we have seen are not mere technicalities,” said Ohio Attorney General Richard Cordray. “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 Daily Reporter’s Marie Rohde also contributed to this report.

Will the foreclosure problems hurt the construction industry? Sound off in The Daily Reporter’s CONSTRUCTION FORUM.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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