Posted on Friday, November 19, 2010
The establishment of a general compensation fund for victims of wrongful foreclosure may be part of possible settlements, according to a spokesman for the leader of the 50-state investigation of the foreclosure crisis and mortgage lender practices.
The coordinated inquiry, led by Iowa Attorney General Tom Miller, is investigating whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The investigation, announced Oct. 13, came after JPMorgan Chase & Co. and Ally Financial Inc.'s GMAC mortgage unit said they would stop repossessions in Florida and 22 other states where courts supervise home seizures. Bank of America Corp. also froze some of its foreclosure proceedings nationwide.
The Washington Post reported earlier that the states and banks are in talks to establish a fund that would compensate people who lost their homes through faulty foreclosures.
"We are in the very early stages of the discussion and a fund is one of several options," said Sandi Copes, a spokeswoman for Attorney General Bill McCollum. McCollum is participating in the attorneys general inquiry. His office has met with Bank of America, JP Morgan Chase, GMAC, PNC Financial Group and Litton Loan Servicing so far in its own investigation.
The attorneys general investigation is on "a fast track" and any resolution might involve multiple settlements, Miller told Bloomberg last week. A global settlement of the task force investigation is unlikely, Miller said. "It would be one bank at a time."
On Wednesday, Miller spokesman Geoff Greenwood told the Sun Sentinel the fund is "one of the many options being considered." He added: "There are no details that have been hashed out. Any characterization of it as a done deal is just inaccurate.
"It simply has been raised as part of the discussion."
Consumer advocates in South Florida are wary, said foreclosure defense attorney Margery Golant. A compensation fund won't resolve the legal issues, she said, and she has heard "part of the deal [with the attorneys general] is a Congressional proposal to paper over the whole mess."
Weston foreclosure defense attorney Roy Oppenheim applauded the fund proposal. "The courts cannot handle this problem," he said. "They are part of the problem."
At the same time, the Florida Bar is increasing its scrutiny of the foreclosure courts.
An article published Monday in the Florida Bar News said that Bar President Mayanne Downs had written to every chief circuit judge in the state, asking that the organization be copied on any judicial order where it was found attorneys did not act according to Florida Bar rules.
The Bar last month added two new complaint categories to help it better track foreclosure attorney misconduct: foreclosure defense and foreclosure fraud. There already are categories for mortgage fraud, loan modification and advertising loan modification.
The Bar currently has 53 pending cases involving 38 attorneys in regards to foreclosure fraud, and another 12 cases involving four attorneys in regards to foreclosure defense.
By Margaret Cronin Fisk, Bloomberg News South Florida Sun-Sentinel.com