Half of the state attorneys general heading a nationwide probe into the nation’s home foreclosures will not be in their jobs next year, a development lenders hope could help speed a resolution, industry lawyers said today.
Voters yesterday declined to re-elect Ohio Attorney General Richard Cordray, one of the most vocal critics of the banking industry. Five other AGs on the probe’s 12-member executive committee are either moving on to higher office, or out of politics.
All 50 state AGs formed a joint probe earlier this month to investigate the use of "robo-signers" in foreclosure proceedings. Bank of America, JPMorgan Chase, Ally Financial’s GMAC Mortgage and Wells Fargo are among the targets of investigators.
AGs have an interest in moving forward quickly before they leave office, especially "spiritual leaders" such as Cordray, said one lawyer who defends servicers in mortgage litigation.
"I think there’s a developing consensus among thought leaders that we can’t let these documentation concerns constipate the flow of housing from borrowers who have no resources, to those who do," the attorney said.
Cordray acknowledged that concerns about the housing market could lead to a resolution of the AG probe "sooner rather than later," though he said that the election results would not necessarily change the outcome of the probe.
"I think there is some interest on part of various parties, both in the industry and among regulators, to see if this can be addressed so this doesn’t drag on for years," Cordray said in an interview with Reuters.
Cordray is the only AG to so far file a lawsuit over the robo-signing issue. He said his office plans to proceed with a hearing to halt GMAC evictions in Ohio scheduled for Nov. 29.
A speedy resolution with the AGs could be complicated by the myriad federal probes underway. The Justice Department, bank supervisors and housing regulators have all said they are examining the issue.
Attorneys involved in the AG investigation have said that fines and procedural fixes could be among the remedies for banks. Loan modifications for borrowers are more contentious because of possible resistance from investors in mortgage backed securities.
Iowa Attorney General Tom Miller, who is leading the foreclosure probe, handily won re-election on Tuesday. Illinois Attorney General Lisa Madigan and Texas AG Greg Abbott were also re-elected, and three other AGs on the executive committee will be in place next year.
Richard Gottlieb, a Dykema attorney who represents lenders, said that the fact that the election is over will make AGs more reasonable.
"It has long been my belief that pragmatism would prevail as soon as the election cycle is over," he said. (Reuters)
