| The settlement between the nation’s biggest lenders and 49 of the states’ attorneys general over abusive foreclosure practices brought big headline numbers – but the news may not have bought the banks much peace of mind in Massachusetts.
Massachusetts Attorney General Martha Coakley, frustrated with the pace of the settlement talks, had filed her own suit in December. At a press conference late Thursday, she clarified that that suit will continue, but with two of its four claims knocked out.
In addition, Coakley signed on to be part of the federal task force investigating possible criminal charges and other claims related to the foreclosure crisis, announced by President Barack Obama in his State of the Union address last week. Coakley is also pushing for a state statute that will require lenders to examine whether a loan modification makes fiscal sense before proceeding with a foreclosure.
"One of the reasons we felt we could sign on to this is that there’s so much blame to go around, we needed to get some remedies in place, and we felt that the remedies that still remain in to us – both in Massachusetts through pursuing our own claims and through the strike force – allow us to get real relief for homeowners, starting soon, and continue to look at criminal liability," Coakley said.
The ongoing Massachusetts suit dealt with four areas where the attorney general claimed banks had engaged in unfair or deceptive practices: Filing foreclosures without possessing the mortgage (as in the Ibanez case); filing flawed documents as part of those cases (robosigning); giving homeowners who were eligible for Home Affordable Modification Program (HAMP) loan modifications the runaround to such an extent that they got foreclosed on instead; and violating Massachusetts laws about land registration by using the Mortgage Electronic Registration System (MERS).
Of those allegations, only the first and last remain in play. The federal settlement will relieve banks of liability for the robosigning in exchange for providing loan modifications to homeowners, including underwater homeowners (estimated to be about $20,000), and some compensation for borrowers who may have been foreclosed on with improper paperwork (approximately $2,000).
Coakley had previously expressed considerable concern about the current state of the loan modification process, and said Thursday that considerable attention will need to be paid to enforcement. But she said she ultimately felt it was better to get additional modifications started now rather than litigate the banks’ handling over the overall HAMP process, something which could take years.
It’s still unclear how the two issues which remain in play in the Massachusetts suit – the so-called Ibanez claims and the allegations against MERS – will impact homeowners and lenders in the Bay State. Thousands of properties which were foreclosed on before the Ibanez decision in 2011 are believed to have Ibanez title defects, and activist registrar John O’Brien of Essex County had alleged that the total amount of lost land registration fees due to the use of MERS in his country alone could add up to more than $22 million.
Coakley also said Thursday that she plans to seek similar concessions as those in the settlement from Fannie and Freddie.
"We all felt, let’s get started on this, put this into practice and see how far it’ll go, and then pursue additional relief from Fannie and Freddie [and other lenders]," she said. "This is a first step." Last month, Coakley had written a letter to the FHFA, Fannie and Freddy’s regulator, pressing the regulatory agency to engage in principal reductions.
