Attorneys seek fund to aid foreclosure victims
As national concern about foreclosures continues to grow, attorneys general from all 50 states say they will push for an agreement with mortgage lenders to help distressed homeowners.
The prosecutors want lenders to standardize their practices to reduce the chances of improper foreclosures and create a fund to help homeowners who have been foreclosed on illegally.
The nation's state attorneys banded together last month to investigate mortgage practices, including lenders' use of "robo-signers" who may have signed off on thousands of foreclosure documents without checking their accuracy.
The prosecutors want lenders to standardize their practices to reduce the chances of improper foreclosures and create a fund to help homeowners who have been foreclosed on illegally.
The nation's state attorneys banded together last month to investigate mortgage practices, including lenders' use of "robo-signers" who may have signed off on thousands of foreclosure documents without checking their accuracy.
A national strategy for settling cases of lenders improperly taking back homes could have a big effect in metro Phoenix, which has one of the highest rates of foreclosure in the nation.
Negotiations with the nation's biggest banks are still in the early stages. But Arizona Attorney General Terry Goddard, who has taken a leading role in the probe into lender practices, outlined for The Arizona Republic potential outcomes the officials are seeking.
"We need to make the loan-modification process more transparent and stop the outrageous practices that are costing people their homes," said Goddard. "There are too many homeowner horror stories in Arizona and across the country."
The state attorneys plan to seek agreements on issues including:
- Loan modifications. News coverage has been filled with stories of homeowners who are in the midst of modifying a loan only to find themselves foreclosed upon. Others claim they have been improperly denied federally supported loan modifications and then lost their homes to foreclosure.
Goddard said the industry needs a standard procedure for loan modifications as well as third-party arbitrators for homeowners who believe that they have been wrongly denied help.
"Homeowners should be able to receive an answer on their loan modification within 30 days and be notified promptly if they are missing paperwork," said Goddard. "The delays in the process now are ridiculous and are costing people their homes."
- A lender-funded pool of money. People who have lost their homes due to improper handling of foreclosures or have been unfairly denied a loan modification could be compensated through this fund.
For those who have already lost homes, Goddard said, it's not practical in most cases to repurchase or otherwise return those homes because they already have been resold after foreclosure. The fund would make another form of compensation available. It also would pay for arbitrators.
Iowa Attorney General Tom Miller was in Washington, D.C., on Tuesday discussing the nation's foreclosure problem with government leaders and said issues with lenders are much bigger than robo-signing. He has already met with the nation's biggest lender, Bank of America, to discuss a settlement that would include the fund.
During a hearing Tuesday in front of the Senate Committee on Banking, Housing and Urban Affairs, executives from JPMorgan Chase & Co. and BofA said they are working to fix problems they have had in processing foreclosures.
The head of Chase's lending division, David Lowman, was interrupted by angry protesters during his testimony.
Senators from both parties voiced frustration with lenders and regulators over the foreclosure mess and called for more investigations.
Republican Sen. Richard Shelby of Alabama said there needs to be more supervision of financial regulators who are overseeing the big lenders, including Fannie Mae and Freddie Mac.
Democrat Sen. Michael Bennet of Colorado said it was unclear why it has been so hard for lenders' servicers to handle loan modifications.
"This is a bipartisan issue," said Goddard. "For the first time I can re- member, all the AGs are in agreement over an issue."
He said if lenders don't agree to a settlement, then they could be facing lawsuits in 50 states.
An agreement with lenders won't likely include a nationwide foreclosure moratorium. Goddard said there are foreclosures being handled legally and ethically that need to go forward so lenders can continue to operate and housing markets can move toward a recovery.
Separately, last month Goddard called for legislation to create a "borrowers' bill of rights" in Arizona. The bill would require mortgage firms to act in good faith with debt-strapped homeowners, communicate promptly and make loan-modification decisions within 30 days.
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