Boston, MAState officials from Massachusetts have targeted the nation's five largest mortgage servicers with foreclosure lawsuits for allegedly pursuing illegal practices and misleading troubled borrowers, according to the Los Angeles Times.
The newspaper reported that in suing, Massachusetts Attorney General Martha Coakley increases the pressure on the banks, which are negoitating with a coalition of attorneys general in an effort to reach a settlement over the firms' foreclosure and mortgage-servicing practices.
The move could also widen a rift between the states involved in the talks and other states, including California, that believe the discussions may be headed in the wrong direction.
Coakley defended their actions and noted action was necessary because "the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law."
The Wall Street Journal reported that the lawsuit named Bank of America corp., JP Morgan Chase & Co., Citigroup Inc., Wells Fargo and Co. and GMAC, and specifically targeted the practice of "robo-signing" mortgage documents.
"We have two clear goals with this lawsuit—one is to provide for real accountability for the role the banks have played in unlawful and illegal foreclosures, and secondly to provide for real and enforceable relief for the harm that the misconduct has caused," Coakley said in a press conference after announcing the lawsuit.
The lawsuit came about because of the alleged injustice that Coakley and some of her colleagues saw, as she noted the banks have had more than a year to "show accountability for this economic mess," according to the Journal.
The newspaper reported that the banks had been hoping to put the issue behind them by reaching a blanket agreement with the prosecutors. The Massachusetts complaint, and potentially similar moves by other states, could be the first phase in a larger legal battle that the banking institutions had hoped to avoid.
"This could put pressure on banks and lead to a stronger settlement for homeowners," Lewis Finfer, executive director of Massachusetts Communities Action Network, told the Journal.
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