Attorneys general in all 50 states have agreed to "speak with one voice to the greatest extent possible," forming a bipartisan group to investigate affidavits and other documents loan servicers have prepared in foreclosing on homeowners.

The decision by state attorneys general and state banking and mortgage regulators in more than three dozen states to coordinate their efforts comes as lenders expand their own internal investigations of foreclosure procedures outside of the 23 states where courts have jurisdiction over foreclosures.

The investigations stem from allegations that workers processing files for the companies "robo signed" thousands of affidavits — meaning they did not personally verify information contained in those documents.

Bank of America said Friday that it was temporarily halting foreclosure sales in all 50 states as it expanded an ongoing review of foreclosure documents filed in judicial foreclosure states, even though the review has so far showed that "the basis for foreclosure decisions is accurate."

GMAC Mortgage and JP Morgan Chase, which were the first lenders to announce reviews of their foreclosure procedures in judicial foreclosure states, say they are also expanding those efforts to other states, but are not suspending foreclosure sales across the board.

GMAC Mortgage said it has hired several legal and accounting firms to conduct independent reviews of its foreclosure procedures in all 50 states.

Foreclosure-sale files will receive an additional review by a specialized team to ensure that each file "is in good order and complies with all laws and requirements of the state of jurisdiction," the company said.

The reviews will also determine whether procedures for exploring alternatives to foreclosure have been fully followed, "and that the timing and substance of the foreclosure is appropriate," GMAC Mortgage said in a statement.

GMAC Mortgage is also continuing "review and remediation activities" in 23 judicial foreclosure states that’s been under way for two months. After each file is reviewed and corrected, if needed, the foreclosure process resumes, the company said.

So far, GMAC Mortgage has "found no evidence to date of any inappropriate foreclosures."

JP Morgan Chase, which announced last month that it was temporarily holding up processing of 56,000 foreclosure proceedings in 23 states, has widened the scope of its review to 41 states and 115,000 loans.

In a conference call with investors today, JP Morgan Chase CEO Jamie Dimon said it could take "several weeks to go through the files and make sure and correct any errors that are in there," and that the company will also have to conduct "in-depth conversations" with regulators and state attorneys general.

"We don’t think there are cases where people have been evicted out of homes where they shouldn’t have been," Dimon said.

He acknowledged that the robo-signing controversy is certain to increase the company’s costs at least "a little bit, and maybe we will have to pay penalties to some of the (attorneys general)."

If controversy drags out longer, it will have a greater impact on JP Morgan Chase and housing markets, he said.

"If you’re talking about three or four weeks, it will be a blip in the housing market," Dimon said. "If it went on for a long period of time it will have a lot of consequences, most of which would be adverse on everybody."

The robo-signing scandal has already made a dent in the supply of "real estate owned" (also known as bank-owned or REO) properties in states like Florida, and could also interfere with short sales of homes that are in some stage of foreclosure.

The Mortgage Foreclosure Multistate Group formed by state attorneys general has four initial objectives, according to a press release issued by Iowa Attorney General Tom Miller, who is leading the group:

  • Putting an immediate stop to improper mortgage foreclosure practices.
  • Reviewing past and present practices by mortgage servicers subject to the inquiry.
  • Evaluating potential remedies for past practices and to deter future improper practices.
  • Establishing a mechanism for more effective independent monitoring of future mortgage foreclosure practices.

"This is not simply about a glitch in paperwork," Miller said. "It’s also about some companies violating the law and many people losing their homes."

Miller acknowledged the economic implications of the investigation, saying the probe and its outcome "need to be fair both to homeowners and also to lenders."

The Mortgage Foreclosure Multistate Group will consult with federal regulators and agencies, including the Mortgage Fraud Working Group of the Financial Fraud Enforcement Task Force (FFETF).

While state attorneys general have agreed to speak with one voice, they will continue to reserve their right to take action in their own state. Attorneys general in a number of states have already demanded that lenders demonstrate they are following the letter of the law, or stop foreclosing on homeowners.

Ohio Attorney General Richard Cordray earlier announced his office had filed a lawsuit against GMAC Mortgage over allegedly fraudulent affidavits, and Cordray said the lawsuit will not be affected by Ohio’s participation in the Mortgage Foreclosure Multistate Group.

The New York State Banking Department, which is also participating in the multistate group, has asked more than 20 loan servicers to suspend foreclosures in New York until they complete internal reviews of their foreclosure practices.

In addition to state attorneys general and regulators, loan servicers accused of employing robo-signing tactics also face liability from lawsuits by former homeowners, which has title insurers seeking written assurances from lenders that they will cover the costs of defending against such suits.

Bank of America is already providing such warranties to Fidelity National Financial Inc., the nation’s largest underwriter of title insurance.

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