Forget for the time being all the Three Stooges document-fumbling surrounding the housing collapse. Set aside the obvious malfeasance of robosigning and rocket dockets.
The question on the table now is, were America's largest mortgage lenders stealing homes?
The recent lawsuit filed by Massachusetts Attorney General Martha Coakley against five of the nation's largest banks for deceptive foreclosure and loan modification practices essentially accuses them of doing exactly that.
Coakley accuses Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial of the following:
1. Engaging in unfair and deceptive foreclosure practices by conducting foreclosures when the defendants lacked the right to do so and misrepresenting to homeowners their roles as mortgagees or as the holders of the mortgages.
2. Engaging in false documentation practices to facilitate their foreclosure practices.
3. Deceiving homeowners in the course of servicing mortgage loans by misrepresenting to borrowers regarding its loan modification programs, acting deceptively in implementing loan modifications and deceiving borrowers regarding foreclosure proceedings.
"The layman's term for that is 'stealing homes,' says Firedoglake blogger David Dayen. "Coakley is accusing banks of stealing homes. They didn’t have the proper proof of ownership to take control of the homes in a foreclosure, and they did it anyway, by forging documents and committing fraud upon state courts."
Coakley's suit also includes the Mortgage Electronic Registration System, or MERS, the epicenter of its "false documentation practices" charge.
Massachusetts isn't the only state that has grown frustrated with the Obama administration's year-long attempt to negotiate a let's-move-forward settlement between the 50 states and the banks. Others, including California, Delaware, Nevada and New York, have distanced themselves from the talks, which appear headed toward an agreement that some AGs say amounts to a hand slap for the big banks.
But as the first to break from the pack, Coakley's suit reframes the debate from a snipe hunt for sundry robo-shenanigans by underlings to some serious charges leveled at top management.
The 50-state agreement under construction looks like it would grant the lenders immunity from prosecution in exchange for a settlement of $20 billion to $25 billion, to be used primarily for principal reduction and loan mods.
Coakley says she'll consider signing onto any forthcoming agreement based on its merits but has made clear she won't be party to any plan that includes broad liability release regarding MERS and other issues.
What's next? Will other states follow Coakley's lead?
Only time will tell.
But her bold break certainly throws into question the attraction of that (now) 49-state work-in-progress, and perhaps the wisdom of attempting to collectively bargain away a national disgrace.
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