A few months ago, we reported how real progress was being made in the ongoing discussions between the Attorneys General of the individual states and the banking institutions under investigation for faulty foreclosures and mortgage malfeasance.

While these negotiations -- spearheaded by Iowa Attorney General Tom Miller -- may ultimately end in a settlement of nearly $20-$25 billion, they are currently taking place without the Attorneys General of New York, Delaware, and Massachusetts, all of whom declined further participation after over a year of discussions.

In fact, Martha Coakley, the Attorney General of Massachusetts, recently made headlines for filing the first state civil lawsuit against several of the parties involved in the settlement discussions -- Wells Fargo, Ally Financial, Bank of America, MERS corp. (Mortgage Electronic Registration System, Inc.), Citigroup, and JP Morgan Chase.

The lawsuit alleges the following "unfair and deceptive trade practices in violation of Massachusetts law":

  • Mortgage lenders used "robo-signers" to sign off on foreclosure documents without a proper (and legally required) review
  • Mortgage lenders did not fulfill loan modification obligations
  • Mortgage lenders corrupted "Massachusetts land recording system through the use of MERS"

Here, the relief sought by Coakley's lawsuit includes:

  • Civil penalties
  • Restitution for affected homeowners
  • Compensation for state fees
  • A permanent injunction providing "a solution for prior unlawful foreclosures and to require that the banks, going forward, ... [act] in accordance with Massachusetts law"

When asked how much the lawsuit could potentially cost the mortgage lenders, Coakley stated, "I can't give you a number, but I can tell you it will be a lot of money."

This is significant because any legal victory -- and damages won -- by the state of Massachusetts would come in addition to the potential settlement reached by mortgage lenders with the Attorneys General.

Not surprisingly, the mortgage lenders were less than thrilled with this development.

"We are disappointed that Massachusetts would take this action now when negotiations are ongoing with the attorneys general and the federal government on a broader settlement that could bring immediate relief to Massachusetts borrowers rather than years of contested legal proceedings," said a spokesperson from JP Morgan Chase.

It must be noted, however, that Coakley has expressed a willingness to consider any settlement ultimately reached by the Attorneys General, perhaps indicating that she would drop the lawsuit in exchange for acceptable terms.

Stay tuned for more from our San Antonio bankruptcy blog ...

Regardless of your financial situation, contact an experienced legal professional to learn more about foreclosure, or your rights under Chapter 7 bankruptcy or Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

(Please note: The firm handles only bankruptcy matters and is not involved in any pending class action lawsuits against banks/mortgage lenders. We take pride in reporting matters that are important to our community.)

Source:

USA Today, "First major state lawsuit filed over 'robo-signing'" Dec. 3, 2011