Yesterday, the state Attorneys General of all 50 states announced the formation of a coordinated multistate working group to review mortgage foreclosure practices within the residential mortgage loan servicing industry. In addition to the state Attorneys General, the multistate working group will include banking and mortgage regulators from a vast majority of the states. The group will also consult with federal regulators and agencies, including the Mortgage Fraud Working Group of the Financial Fraud Enforcement Task Force, formed in 2009. 

The Mortgage Foreclosure Multistate Group will investigate the practices of residential mortgage loan services providers to determine whether the businesses had appropriately reviewed and verified documents when submitting affidavits and other papers in support of both judicial or non-judicial mortgage foreclosure proceedings. The group will also examine the alleged practice of submitting signed affidavits without the actual presence of a notary. 

According to a press release issued yesterday by Attorney General Tom Miller of Iowa, one of the lead states in the investigation, "Submitting foreclosure documents without verification, with false representation, and/or signing certain legal documents outside the presence of a notary public may constitute deceptive acts and/or unfair practices and may otherwise violate state laws and court rules."

The states' review of the mortgage loan foreclosure procedures will include an examination of those practices under state unfair or deceptive acts and practices (UDAP) laws, which provide state Attorneys General with significant authority to demand the production of documents, enjoin deceptive business practices, and obtain remedies for past practices in violation of state UDAP laws. UDAP laws, which vary from state to state, also generally provide for significant civil penalties for violations, including enhanced penalties for violations against senior citizens.

The Mortgage Foreclosure Multistate Group's initial focus will include investigating the procedures utilized by mortgage services providers in submitting documents in support of foreclosure proceedings, reviewing potential remedies, and creating an independent monitoring system for future foreclosure proceedings. 

The Group's Executive Committee is made up of state Attorneys General from Arizona, California, Colorado, Connecticut, Florida, Illinois, Iowa, New York, North Carolina, Ohio, Texas, and Washington, as well as the following state banking regulators: the Maryland Office of the Commissioner of Financial Regulation, New York State Banking Department, and Pennsylvania Department of Banking. 

Ballard Spahr's Consumer Financial Services Group attorneys Alan S. Kaplinsky, Chair and Martin C. Bryce, Jr., will speak at the following two programs on the residential foreclosure documentation issue:

  • Monday, October 18, 2010, from 1:00 p.m. to 2:00 p.m. ET. This event is a webinar. To register, please click here.

  • Wednesday, October 27, 2010, from 12:00 p.m. to 2:15 p.m. ET. This is a live CLE program held in our Philadelphia office, at 1735 Market Street, 42nd Floor. To register, please click here.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs).


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