Massachusetts AG Martha Coakley announced this week that she's suing the big banks for mortgage fraud. Be still, my heart!
So you can see a noose tightening around the necks of the banks, who would like nothing better than to strike a deal where AGs release them from liability in return for a nominal fee. Not all the AGs are willing to take that step, as detailed above. And now, Coakley, who has been very good on this issue, is out with perhaps the most wide-ranging lawsuit against the big banks over foreclosure fraud. Recall that some favorable court rulings in Massachusetts, including the Ibanez case, have ruled that banks don’t have standing to foreclose in cases where they improperly assigned mortgages. That is part of the case law in Massachusetts, making it a fertile environment in which to pursue this case.
According to the Boston Globe MERS is also named in the lawsuit:
The suit, filed in Suffolk Superior Court, also names the private company Mortgage Electronic Registration System Inc. and its parent, MERSCORP Inc., as defendants, according to the attorney general’s office.
“The AG’s lawsuit seeks accountability for the banks’ unlawful and deceptive conduct in the foreclosure process, including unlawful foreclosures, false documentation and robo-signing, MERS, and deceptive practices related to loan modifications,’’ the news release from Coakley’s office said.
Yves Smith at Naked Capitalism:
GMAC is trying to get other big banks to follow suit. I hope the state and other groups that do substantial financial business with banks (largish churches are also attractive clients) make it clear than any effort to punish the state for enforcing the law will be met by moving their accounts to smaller institutions that respect the law.
From the Wall Street Journal:
GMAC Mortgage, the mortgage lender of Ally Financial Inc., is exiting the vast majority of its lending in Massachusetts a day after the state sued it over its foreclosure practices.
The nation’s fifth-largest mortgage originator said it “has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable,” ratcheting up the high-stakes mortgage fight there….
GMAC Mortgage will stop purchasing loans from correspondent lenders and wholesale brokers, which makes up the majority of the company’s business. The lender said it was “disappointed” but that “it has an obligation to manage risks and deploy capital in an appropriate manner and in a way that protects the investment of the U.S. taxpayer.”
Get a load of the sanctimoniousness. Since when do the interests of investors trump the rule of law? In fact, the logic is backwards, since investors are not well protected in a regime where laws are not respected. Does anyone want to invest in, say, Somalia?
Reader MBS Guy notes by e-mail:
Ally will stop lending in the state. Now litigation costs are too high in Massachusetts, according to Ally Bank, which is 74 percent owned by the US Treasury.
This is a bit funny, since the lawsuit involves issues with loans which were originated and, generally foreclosed, in the past. Ally has said that they have fixed all of their robo-signing issues, so it shouldn’t be a problem for newly originated loans.
Given its ownership structure, is this a pissy message to Massachusetts from Ally itself, or from its majority shareholder for tanking the AG Task Force?
And get a load of this part by an industry mouthpiece:
“It also sends a signal to Massachusetts and other states that if you make it difficult for lenders to act they will take their business elsewhere,” Mr. [Guy] Cecala of Inside Mortgage Finance said of GMAC’s decision. “There is no law you have to operate in all 50 states.”