Banks Sued – The Massachusetts attorney general has filed a lawsuit against five large U.S. banks accusing them of deceptive foreclosure practices, a signal of ebbing confidence that a multi-state agreement can be worked out.
Attorney General Martha Coakley said on Thursday she filed the lawsuit partly because it has been taking too long to hammer out a nationwide settlement. For more than a year, state and federal officials have been negotiating a deal in which banks would pay billions of dollars in fines, to go toward housing relief, in exchange for legal protection against future suits.
The banks being sued in the Massachusetts lawsuit, filed in state court in Boston, accuses Bank of America Corp, JPMorgan Chase & Co Inc, Citigroup Inc, Wells Fargo & Co and GMAC of deceptive foreclosure practices, such as using robo-signers and false documents.
“Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law,” Coakley said in a statement.
The attorney general in Iowa, Tom Miller, who is leading the negotiations for the states, said in a statement they hope to reach a settlement “soon.” He also said Coakley had indicated she is still open to joining the settlement.
“We’re optimistic that we’ll settle on terms that will be in the interests of Massachusetts,” Miller said.
However, analysts said Coakley’s lawsuit is a bad sign for banks, which hope a deal with states and federal authorities could help the industry move beyond the legal fallout that has dogged it since the peak of the financial crisis.
“I can’t say anything is dead, but it sure looks like this is a negative. The banks are going to have these suits out there for years.” said Paul Miller, a bank analyst with FBR Capital Markets.
The mortgage servicing units of the five banks are accused of taking shortcuts as a way to deal with a deluge of foreclosures in the wake of the 2008 credit crisis. The suit also names the banks’ private mortgage registry, MERS, as a defendant, accusing it of dodging fees and corrupting the state’s land recording system.