Lawsuit May Strain Foreclosure Talks

 
Massachusetts Attorney General Martha Coakley filed suit against five major banks on Thursday (December 1), accusing them of using illegal mortgage practices to cheat homeowners and make the nation's foreclosure crisis worse.

The lawsuit itself is nothing unusual: States have long contended that banks used shady practices such as ''robosigning'' foreclosure documents instead of checking to ensure that the documents are accurate to get delinquent borrowers out of their homes sooner. But Coakley's decision carries national importance because it could complicate 50-state settlement talks that have been ongoing for more than a year between the banks and state attorneys general.

As Stateline explained in October , state attorneys general have been hoping to reach a national settlement with the five banks — Bank of America, Citigroup, JP Morgan Chase, Wells Fargo and Ally Financial (formerly GMAC) — that could bring the states as much as $25 billion. But as the negotiations have dragged on, several attorneys general, including those in Delaware and California, have grown frustrated and indicated that they cannot wait longer. Coakley emphatically underscored that sentiment with her lawsuit.

''They have had more than a year to show they understood their role and their need to show accountability for this economic mess and they failed to do so,'' Coakley said, according to The Boston Globe . ''Whether through the courts or negotiations, we will accept only one result, obtaining accountability from these banks and getting real relief for homeowners.''

Bank representatives said they planned to defend themselves vigorously in court. Meanwhile, The Wall Street Journal notes that Coakley's lawsuit will reverberate in other state capitals. ''The Massachusetts lawsuit,'' the paper says, ''is likely to be closely scrutinized by other states looking at what action they might take if a deal collapses.''
 
X

Related Stories

PCS.PRODUCTION.1.20140221.1210 (PEWSUWVMWAPP01)