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Attorneys General to Probe Foreclosure Fraud Scandal


Posted on Oct 12, 2010

A spokesman for the White House announced today that the Obama administration plans to "get to the bottom" of the robo-signing foreclosure scandal even though the White House opposes a national moratorium on foreclosures.  

Following the recent discovery of document irregularities at J.P. Morgan Chase, Bank of America, Ally Financial/GMAC and Wells Fargo, many politicians and lawmakers have been calling for a national halt to foreclosures until banking industry compliance can be confirmed.  The Obama administration has gone on record recently against a blanket moratorium on all foreclosures out of concern for unintended consequences that a broad halt could bring.

Meanwhile, up to 40 state attorneys general are prepared to announce a broad probe into mortgage servicing practices hoping to pressure the industry into rewriting large numbers of troubled loans and to bring their conduct into compliance with state laws. "I think the mortgage-servicing firms need to understand that they face real exposure now, and they would be well advised to take this seriously, to clean this up by doing loan workouts to keep people in their homes, which up till now they've just paid lip-service to," said Ohio Attorney General Richard Cordray.

Iowa Attorney General Thomas Miller is leading the effort. Some attorneys general are hoping to look beyond the narrow issue of fraudulent document filings. The issue "I'm most engaged in right now is the big servicers who are initiating foreclosures while the borrower is in the modification process," said Arizona Attorney General Terry Goddard.

Sources: The Washington Post and The Wall Street Journal 

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