JPMorgan, Bank of America Face `Hydra’ of State Foreclosure Investigations
By Margaret Cronin Fisk – Oct 6, 2010 12:01 AM ET
JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc., defending allegations of fraudulent home foreclosures from customers and Congress, may face the most financial peril from investigations by state attorneys general.
Authorities in at least seven states are probing whether lenders used false documents and signatures to justify hundreds of thousands of foreclosures, and the number of these inquiries will grow, according to state officials and legal experts.
“You’re going to see a tremendous amount of activity with all the AGs in the U.S.,” Ohio Attorney General Richard Cordray said in an interview. “We have a high degree of skepticism that the corners that were cut are truly legal.”
JPMorgan, Bank of America and Ally have curtailed foreclosures or evictions in 23 states where courts have jurisdiction over home seizures.
While homeowners in those states and elsewhere must usually show damages to win a lawsuit, “attorneys general can just sue over deceptive sales practices and get penalties,” said Christopher Peterson, a University of Utah law professor who specializes in commercial and contract law.
In Ohio, penalties include fines up to $25,000 per violation, with each false affidavit or document considered a violation, according to state law enforcement officials. In Iowa, fines rise to a maximum of $40,000 for each violation.
This penalty would apply to “every instance of an affidavit that was filed improperly or every time facts were attested to that weren’t true,” said Cordray. His counterpart in Connecticut, Richard Blumenthal, has called for a freeze on foreclosures and said the submissions are a “possible fraud on the court.”
Officials in Ohio and Connecticut, along with Florida, Texas, North Carolina, Iowa and Illinois, said they are investigating mortgage foreclosure practices.
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