Major Banks Back in the Spotlight
Although major banks (NYSEARCA:XLF) have been on the climb after central banks decided to provide cheap dollars for Europe, the struggle is far from over. On Thursday, Massachusetts Attorney General Martha Coakley sued the five largest mortgage services. It is the first government lawsuit that places all five banks in the hot seat for fraudulent foreclosure practices.
The civil suit was filed in Superior Court in Suffolk County, and takes aim at Bank of America (NYSE:BAC), JP Morgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and Ally Financial for allegedly breaking laws in order to process foreclosures at a faster pace. The lawsuit also includes the Mortgage Electronic Registration System, an electronic clearinghouse created by the mortgage industry.
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The WSJ explains, “The Massachusetts lawsuit alleges that the five banks engaged in robo-signing, in which employees sign legal documents without proper review—and commenced foreclosures even though they hadn’t properly obtained the mortgage assignments. In addition, the banks deceived borrowers about the process, requirements and availability of loan modifications, the lawsuit says. The banks’ use of MERS undermined the state’s public land system and allowed the banks to avoid the payment of millions of dollars of filing fees, according to the lawsuit.”
Robo-signing involves bank employees signing hundreds and thousands of documents and affidavits without taking the time to verify the information on the paperwork. Some reports reveal that one bank official signed-off on almost 10,000 documents in one month.
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Unsurprisingly, the major banks believe they did nothing wrong. Wells Fargo said it will “vigorously defend” itself and continue to “develop housing remedies across the country.” Meanwhile, a Citigroup spokesman said, “We believe we have operated appropriately, in compliance with existing laws.”