Massachusetts Sues Five Banks Over Foreclosures

The state of Massachusetts has filed suit against five national banks in connection with their roles in allegedly pursuing illegal foreclosures on properties in Massachusetts as well as deceptive loan servicing.

Massachusetts Attorney General Martha Coakley took the action against Bank of America, Wells Fargo, JP Morgan Chase, Citi, and GMAC.  It also names Mortgage Electronic Registration System, Inc. (“MERS”) and its parent, MERSCORP Inc., as defendants.

“The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” Coakley said.  “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners.”

The allegations

The suit accuses the banks of engaging in four illegal activities:

• Pervasive use of fraudulent documentation in the foreclosure process, including so-called “robo-signing”;
• Foreclosing without holding the actual mortgage (“Ibanez” violations);
• Corrupting Massachusetts’ land recording system through the use of MERS;
• Failing to uphold loan modification promises to Massachusetts homeowners.

The use of robo-signers is perhaps the most publicized of the alleged activities. According to the complaint, the banks used false documentation in the foreclosure process, including so-called “robo-signing”, whereby bank personnel signed affidavits that were untrue, or not based on the signor’s actual knowledge. An entity wishing to foreclose on a property must demonstrate it has filed an affidavit in compliance with Massachusetts law.

By October 2010, Coakley says the banks’ flagrant disregard of affidavit and notary process requirements became widely known. Filings with various Registers of Deeds provided to the Attorney General’s Office revealed the pervasive use of mortgage service employees to sign hundreds of affidavits and sworn statements without personal knowledge of the information contained in those affidavits. 

Evidence also suggests these practices were not confined to the foreclosure process, but also used in the assignment, transfer and modification of mortgages secured by property in Massachusetts.

The complaint also alleges the banks deceived and misrepresented to borrowers the process, requirements, and availability of loan modifications. This charge is echoed in hundreds of complaints to ConsumerAffairs.com from homeowners nationwide over the last two years.

Actual complaints

"Since February 2010 I have filed six home modification applications with Bank of America, and each time they have lost, found, when I gave them the tracking number and who signed for it, placed them in review, lost pages, that I sent in again, and each time time lapsed so I had to reapply," Lydia, of Oakland Park, Fla., told ConsumerAffairs.com.

Debbie, of Hackettstown, N.J., reports a similar experience with Wells Fargo.

"They have the most amazing black hole for paperwork," Debbie said. "The reps are always courteous but if you don't tell them to look further in their electronic file, they only read what is on the surface. I've must have made 100 calls to them since April, 2010.

Debbie said she started out trying to do a loan modification but was denied. "Then they told me I could do a deed in lieu or a short sale. I have a FHA mortgage and had to have the house listed at their appraisal price for 120 days. After no offers were made I was eligible to file for a deed in lieu. I submitted all the paperwork immediately and followed their instructions to the T. I was then told that in order to comply with their guidelines, I must vacate the property within 60 days and if I followed all the steps, I would be given some money to help with moving expenses. So, I moved out on July 1. A few days later I contacted them to see how things were going and was told that I was denied because they didn't receive the paperwork on time and my contact was no longer with them. They had all my e-mails but not the file.

Saying one thing, doing another?

Coakley says the banks publicly claimed to be engaged in widespread loan modifications aimed at preserving home ownership and avoiding unnecessary foreclosures.   Through the National Homeownership Retention Program, which commenced on November 6, 2008, these banks represented that they would work with borrowers to help them avoid unnecessary foreclosures by reducing monthly mortgage payments to affordable and sustainable levels.

The complaint alleges these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected.

The Massachusetts lawsuit seeks civil penalties, restitution for harm to borrowers and compensation for registration fees that were 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.