Saying Banks Are Stalling, Coakley Files Foreclosure Suit

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Major U.S. banks are expressing disappointment in a Massachusetts lawsuit accusing them of deceptive foreclosure practices such as “robo signing.” Attorney General Martha Coakley has filed the lawsuit in state court, saying a national effort to win a settlement from banks has been dragging on too long.

Attorney General Martha Coakley at a Boston news conference Thursday (AP)
Attorney General Martha Coakley at a Boston news conference Thursday (AP)

Massachusetts isn’t the only state accusing banks of falsifying documents and using deceptive methods to foreclose on homeowners. Attorneys general across the country have been trying to negotiate a settlement. But the top Massachusetts prosecutor says the banks are stalling.

"They’ve had more than a year to show they’ve understood their role, and the need to show their accountability for this economic mess," Coakley said. "And they’ve failed to do so. That’s why we are filing suit."

Coakley is suing Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., GMAC and Citigroup Inc. in Massachusetts court. Mortgage Electronic Registration System, Inc., a mortgage servicing organization used by those banks and others, is also targeted. Coakley wants banks to give breaks to people currently facing foreclosure. She also wants them to pay damages to people who’ve already lost their homes.

"What ultimately will that dollar figure be? I can’t tell you, but I think it will be a lot," she said.

"We’ve been waiting for something like this to happen for a long time," said Diana Franco, who works NOAH, an East Boston community development agency. She helps distressed homeowners ask banks for lower mortgage payments.

"These banks are out there publicly saying they’re doing these loan modifications," she said. "But in reality, they’re not doing anything, they’re not working with the clients."

Some of the banks being sued are responding gently, only saying they’re disappointed. They were hoping to avoid protracted legal battles in all 50 states. Wells Fargo CEO John Stumpf told CNBC his bank has been working hard to come to a broad agreement.

"Which I think would be good for the country and good for housing," Stumpf said. "We can do that better through working together, as opposed to settling our differences in court."

The Massachusetts lawsuit may only underscore the differences between states on the issue. Many attorneys general disagree over what terms to offer banks; for example: how much immunity from civil lawsuits to give banks in exchange for a multibillion-dollar payment? Even so, a deal had been expected soon. Coakley denies that the Massachusetts lawsuit would undermine the national talks.

"We’ve taken this action based upon what we think would be in Massachusetts’ interest," Coakley said. "This is frankly not so much about strategy as it is getting accountability and relief for homeowners."

The lead attorney general in the national negotiation, Iowa’s Tom Miller, says he’s optimistic the terms of a national settlement will be in Massachusetts’ interest after all. Coakley says she’s leaving that door open, but wants to move forward.

This program aired on December 2, 2011.

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Curt Nickisch Business & Technology Reporter
Curt Nickisch was formerly WBUR's business and technology reporter.



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