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Expert Says Foreclosure Problems Should Serve as Wake-Up Call for Banks to Cooperate with States

Director of National State Attorneys General Program Says Mortgage Issues Point out Need for Stricter Oversight by States

 

Public Affairs, 212-854-2650
 
New York, Oct. 13, 2010--As 49 states launch their investigation in conjunction with federal officials into the mortgage-servicing industry, the director of the National State Attorneys General Program at Columbia Law School said this episode should serve as a wake-up call to banks who have yet to take seriously the states’ role as a financial watchdog. 

James Tierney, a former Maine attorney general, said recent allegations that mortgage servicers, including major banks, submitted fraudulent documents to foreclose on thousands of homes nationwide, point out the need for tighter scrutiny on the state level.

“Lenders have not denied that they failed to follow the law in foreclosure procedures, but justified it by saying there were so many houses to foreclose that they just couldn’t follow the law without actually hiring people to do it,” Tierney said.

“This behavior is consistent with the ‘tin ear’ shown by some lenders to state law enforcement. They’ve tried in both the Supreme Court and Congress to get rid of state consumer protection laws regarding lending practices but have failed.  The attorneys general are now appropriately attempting to determine the truth in order to assure state laws are followed and to get the housing industry back to profitability." 

A coalition of 41 attorneys general will work with federal officials from numerous agencies and with lenders in order to determine the extent and impact of the problem of incorrect documentation on foreclosures. Some large banks have temporarily suspended foreclosures and the sale of foreclosed homes. These moratoriums were sparked by reports about so-called robo-signing, where the signature of a bank officer is put on foreclosure papers even if that person never reviewed them.

Tierney said now was the time for banks to “stand back from their lobbying” and work with attorneys general on solutions that do not involve protracted litigation. “In order to accomplish this, a better understanding of how the two sides operate, think, react and make decisions is critical,” he added.

Columbia Law School, founded in 1858, stands at the forefront of legal education and of the law in a global society. Columbia Law School joins its traditional strengths in international and comparative law, constitutional law, administrative law, business law and human rights law with pioneering work in the areas of intellectual property, digital technology, sexuality and gender, criminal, national security, and environmental law.