All 50 states join probe of mortgage industry
10/13/2010WASHINGTON - All 50 U.S. states launched a joint investigation of the mortgage industry Wednesday, a move some experts fear may slow sales of foreclosed homes and threaten the recovery of the fragile housing market.
The state attorneys general are looking at allegations some banks did not properly review files or submitted false statements to evict delinquent borrowers from their homes during a foreclosure crisis that is one of the most visible wounds of the 2007-2009 recession.
"We are in the fourth year of a housing and economic crisis that was brought on by lax practices of the mortgage lending industry," Minnesota Attorney General Lori Swanson said.
"The latest allegations of corner-cutting and slipshod paperwork are troubling, but perhaps not surprising," she said.
Officials in at least 10 states, including Ohio and Florida, previously announced separate probes into questionable foreclosure tactics.
Industry analysts warn the investigation could slow foreclosure proceedings. One of every four homes sold in the second quarter was a foreclosed property and any slowing could have an impact on the broader economy, as the housing market traditionally drives recoveries after a downturn.
Underscoring those concerns, the regulator for the government-owned mortgage giants Fannie Mae and Freddie Mac called on mortgage servicers not to slow foreclosure cases that had clean paperwork.
The United States has an $11 trillion residential mortgage market.
The states - including Ohio Attorney General Richard Cordray, who sued one large lender last week in Lucas County Common Pleas Court - are investigating the use of "robo-signers" - people who sign hundreds of affidavits a day - by banks and firms that collect monthly mortgage payments. It is alleged they did not properly review the documents they were signing.
"What we have seen are not mere technicalities, as some suggest," Mr. Cordray said.
JPMorgan Chase, the second-largest U.S. bank, said Wednesday it had identified some issues in its review of foreclosure affidavits but was "pretty comfortable" its decisions to foreclose were proper.