The Maine Attorney General’s Office is joining an effort with AGs and regulators in 49 other states and the District of Columbia to investigate “robo-signing” related to foreclosures in the mortgage industry.
The coordinated investigation will look into whether large mortgage service companies improperly submitted documents in support of foreclosures. Essentially, individuals at these companies are supposed to have personal knowledge of the facts of the case, and must sign legal affidavits — spelling out those facts — in the presence of a notary.
A number of legal cases brought to light recently suggest that was not always the case, and that individuals instead signed affidavits without knowledge, without a notary.
“This issue affects peoples’ homes, the stability of our families and our local economy and the integrity of our judicial system,” said Attorney General Janet Mills in a Wednesday statement. “This probe will be thorough, expeditious and fair to all concerned.”
It’s hard to know exactly how many homes have been foreclosed on in Maine through its court system. According to Will Lund, director of the Maine Office of Consumer Credit Regulation, there have been between 250 and 400 active foreclosure cases in Maine courts every month for the past two years. Roughly 300,000 Maine homeowners have some sort of mortgage, he noted. Of those, about 270,000 are being serviced by the large, out-of-state companies that are being questioned in the robo-signing investigation.
“The number of cases potentially affected by the robo-signing is in the thousands in Maine,” said Lund.
In the release Mills pointed to three court decisions in Maine in the last two months that found “serious flaws” with documents filed on behalf of mortgage servicers. Maine’s highest court ruled in August that Mortgage Electronic Registration Systems Inc., (“MERS”) is not a proper party to a foreclosure action. In addition, courts in both Maine and Florida have sanctioned GMAC for inappropriate document signing practices.
Assistant Attorney General Linda Conti said she would be looking into foreclosure actions taken since 2009, when Maine amended its mortgage statutes to require additional information from lenders to allow them to foreclose on property.
Conti said she would look at what information is in the affidavits used to support the foreclosure process, and at the overall process that was used. Conti said the issue seems to be with the large national mortgage servicing firms, not the regional banks and financial institutions that hold mortgages.
The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. Some foreclosures could be overturned. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.
The state officials said they intend to use their investigation to fix the problems that surfaced in the mortgage industry.
“This is not simply about a glitch in paperwork,” said Iowa Attorney General Tom Miller, who is leading the probe. “It’s also about some companies violating the law and many people losing their homes.”
Ally Financial Inc.’s GMAC Mortgage Unit, Bank of America and JPMorgan Chase & Co. already have halted some questionable foreclosures. Other banks, including Citigroup Inc. and Wells Fargo & Co., have not stopped processing foreclosures, saying they did nothing wrong.
Lund said there may be at least one benefit from the current situation.
“This pause in the action may permit lenders to review applications for loan modifications,” said Lund. “Folks who may have not otherwise obtained loan modifications may get them.”
Lund said his office speaks with as many as 40 or 50 Mainers a day who are in some part of the preforeclosure or foreclosure process. His office works with some of the cases, and refers others to nonprofits who help the homeowners for free. While his office works to modify the terms of the loans with the lenders, those firms have no requirement to be reasonable, he said.
“It is very, very difficult to negotiate a loan modification,” Lund said.
The Associated Press contributed to this report.