After a year of fruitless negotiations between major U.S. banks and the nation's state attorneys general, Massachusetts has filed the first major lawsuitover so-called "robo-signing" foreclosure processing.
Attorney General Martha Coakley filed suit against Bank of America , JP Morgan Chase , Citi , Ally Financial and Wells Fargo , as well as the MERS corp (Mortgage Electronic Registration System, Inc.)
The Attorney General alleges these five entities, "engaged in unfair and deceptive trade practices in violation of Massachusetts' law by: Pervasive use of fraudulent documentation in the foreclosure process, including so-called "robo-signing", foreclosing without holding the actual mortgage, corrupting Massachusetts land recording system through the use of MERS, and failing to uphold loan modification promises to Massachusetts homeowners."
The suit seeks civil penalties and restitution for slleged harm to borrowers, in addition to compensation for state registration fees that were allegedly avoided. The lawsuit also seeks, "to hold the banks accountable through permanent injunctive relief to provide a solution for prior unlawful foreclosures and to require that the banks, going forward, register assignments and other documents in accordance with Massachusetts law."
When asked how much the banks could have to pay out if they lose the suit, Coakley responded, "I can't give you a number, but I can tell you it will be a lot of money."
While several lawsuits have been filed surrounding the subprime mortgage mess that resulted in the biggest housing crash since the Great Depression, this is the first state suit over alleged fraudulent documentation in foreclosure processing. The state of Nevada recently made foreclosure documentation fraud a criminal act.