As discussed in previous posts, the Attorneys General of the 50 states and several major banks have been involved in settlement negotiations concerning widespread abuses in the mortgage industry and fraudulent foreclosure practices for well over a year. However, it now appears that these negotiations may be carrying on too long for the Attorney General of one eastern U.S. state, who recently filed the first state lawsuit over these fraudulent foreclosure practices.

According to reports, Massachusetts Attorney General Martha Coakley filed a state civil lawsuit against six of the major parties implicated in the foreclosure scandal, including Wells Fargo, JP Morgan Chase & Co., Bank of America, Ally Financial, Citigroup, and the MERS corp. (Mortgage Electronic Registration System, Inc.)

Specifically, the state civil lawsuit alleges that the aforementioned parties "engaged in unfair and deceptive trade practices in violation of Massachusetts' law" by relying upon faulty foreclosure procedures (i.e., improper document review, falsified signatures and use of "robo-signers"), failing to fulfill loan modification promises to homeowners, and damaging the state's land recording system via MERS.

Here, Coakley is seeking both civil penalties and restitution for financial harm suffered by borrowers, as well as remuneration for state registration fees otherwise avoided by the named parties.

In addition, she is seeking a permanent injunction that "provide[s] a solution for prior unlawful foreclosures" and which orders the parties to comply with Massachusetts law in the future.

It is worth noting that negotiations between the mortgage lenders and the Attorneys General are still continuing -- sans the participation of Massachusetts, New York, and Delaware -- and that any settlement reached (believed to be upwards of $20 billion) would be in addition to the lawsuit filed by Massachusetts.

Still, it appears that Coakley may be amenable to participating in any settlement ultimately reached by the Attorneys General, (potentially dropping the suit) if satisfactory and timely terms are reached.

"[Attorney General Coakley] indicated that she'll evaluate the joint state-federal settlement we're negotiating, which we hope to reach soon," read a statement by Iowa Attorney General Tom Miller, one of the leaders of the settlement negotiations.

Stay tuned for further developments from our Phoenix bankruptcy blog ...

If you are facing foreclosure, you should strongly consider contacting an experienced bankruptcy attorney to learn more about your rights and your options under Chapter 13 bankruptcy.

This post is for informational purposes only and is not to be construed as legal advice.

Source:

USA Today, "First major state lawsuit filed over 'robo-signing'" Dec. 3, 2011