Seventeen out of the fifty state attorneys general currently investigating the robo-signing foreclosure scandal at some of the nation's largest lenders will be out of a job in a few months.
In fact, one of the leaders of the cause, Ohio Attorney General Richard Cordray, who filed a lawsuit against Ally Financial's GMAC Mortgage, charging faulty foreclosure practices, lost re-election to Mike DeWine.
Iowa Attorney General Tom Miller, who is heading up the investigation, did keep his seat and sent out a statement saying: "While some members of the multistate group, including a few executive committee members, will change political leadership in January, these changes do not affect the work we are now doing at the staff and leadership levels. This is a bipartisan and united effort with a clear mandate to put a stop to improper mortgage practices."
I spoke with AG Miller this afternoon about the possibility that the change in leadership would speed up the process:
Miller: I don't think it will speed it up. We're already going as fast as we can, but the limitations are we want it to be thorough. I don't think that some AGs leaving will make it go any faster than it is.
Olick: What about the fact that some on the investigation's executive committee were not re-elected?
"They're not fully funding the modification side of it, just as they didn't fund the foreclosure process."
Miller: I think that the executive committee states were chosen because of the AGs and staff, and in each and every case the staff are very engaged in the investigation [staffs largely don't change]...I think as a group there's a lot of interest in investigating this. If there are a few [new AGs] with less interest, there's still going to be a lot of interest in doing this right.
Olick: After meetings with the AGs, some bank sources say you are more interested in pushing mortgage modifications than fixing foreclosure paperwork. Is that true?
Miller: We're very focused on the robosigning, that's what got us here, but in addition we want to focus on creative solutions and one analogous problem is that they're not fully funding the modification side of it, just as they didn't fund the foreclosure process. Also there's the nexus of maybe instead of paying huge fines they adequately fund the modification process.
As soon as AG Miller said that I immediately thought he was talking about a deal that banks would put money into principal write-down or lower rates, instead of paying huge fines. However, he said the deal would be that the banks would increase staffing levels to deal with modifications, instead of paying fines. When I pushed him on principal write down, he admitted, "We want to look too at some of the substantive modification processes and see if there are ways they can do more modifications that would meet the basic criteria of people being able to make those payments."
Today a JP Morgan executive told a conference in Boston that the bank would start up foreclosures again in 40 states "in a few weeks." Bank of America and Ally/GMAC have already started submitting foreclosure documents again. I asked Miller if he thought that was too soon.
"We would like to have a chance to do some verification before they move forward, however we've said in Iowa that for properties that are vacant, if they can sell those properties and they've checked out the process, we don't have any objection to vacant property sales."