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Up to 40 States to Launch Probes Into Foreclosure Mess

The attorneys general of up to 40 states plan to announce soon a joint investigation into banks' use of flawed foreclosure paperwork.

AP

A person briefed on the investigation said Saturday night that an announcement could come as early as Tuesday. The person spoke on condition of anonymity because the investigation was not yet public.

Iowa Attorney General Tom Miller will lead the investigation. Miller already has been leading multistate reviews of questionable foreclosure documents.

A joint investigation by 40 states would further escalate pressure on banks to widen their suspensions of foreclosures. On Friday, Bank of America became the first bank to halt foreclosures in all 50 states.

JPMorgan Chase, Ally Bank's GMAC Mortgage unit and PNC Financial have stopped foreclosures in the 23 states where foreclosures must be approved by a judge.

The plans for a joint inquiry were reported earlier by Bloomberg News.

A furor has been growing as evidence has surfaced that mortgage lenders have been using flawed court papers to evict homeowners. That's led state and federal officials to ramp up pressure on the mortgage industry.

Officials in several states have either announced they are investigating potential legal violations or have called for a freeze on foreclosures.

Ohio Attorney General Richard Cordray was the first to sue a mortgage company over the issue. He sued Ally last week, claiming the company's employees signed and filed false documents to mislead courts. Ally says the company's practices were neither fraudulent nor deceitful.

Attorney General Eric Holder has said the federal government is looking into the issue.

And Sen. Christopher Dodd, D-Conn., the chairman of the Senate Banking Committee, said he would hold a hearing on the issue next month.

Problems with foreclosure procedures were discussed during two recent conference calls between officials from the Treasury Department, Department of Housing and Urban Development, White House and other agencies, according to an Obama administration official who spoke Saturday on condition of anonymity because the meetings were private.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.