Nevada, California plan joint inquiries into mortgage fraud
Nevada and California, states with the highest foreclosure rates in the nation, will team up to investigate allegations of foreclosure fraud and other misconduct in the mortgage industry.
At a joint news conference in Los Angeles on Tuesday, Nevada Attorney General Catherine Cortez Masto and California Attorney General Kamala D. Harris said their offices would share litigation strategies and would link their teams in the handling of both criminal and civil investigations.
The two states will combine evidence and information gathered during ongoing investigations but will do separate prosecutions.
Both states have created special task forces to investigate robo-signing of fraudulent loan documents before the housing market crashed and predatory practices on loan modifications in recent years.
“These homeowners want accountability and consequences,” Harris said. “They deserve to have both. This is essentially a law enforcement agreement.”
Harris said her office has been investigating fraud by people preying on borrowers in distress and misconduct in the securitization of the mortgages, especially those “sold to California.”
Harris said both states have “mutual targets of interest” to investigate but didn’t give specifics. She said the partnership with Nevada gives both states a “broad mandate to investigate wrongdong” in each of the major mortgage-related categories: origination, securitization and modification.
The mortgage crisis in Nevada and California is similar because both states allow a bank to foreclose on a borrower’s home without court oversight, called “nonjudicial foreclosure.”
She said the alliance is about “achieving meaningful relief” for people in foreclosure or seeking modifications and the pursuit of “lasting reforms so what has occurred never happens again.”
Masto said that “fraudulent mortgage and foreclosure practices … continue to devastate lives, homes, and the economy in Nevada and California.”
“This strong partnership will allow our states to make an even more concerted effort to hold fraud perpetrators accountable and ensure law-abiding homeowners receive justice,” she said.
Nevada leads the nation with one in every 180 homes receiving a foreclosure notice. California is second, with one in every 243 housing units facing a new foreclosure.
The announcement comes less than a week after Massachusetts Attorney General Martha Coakley filed a lawsuit against the nation’s five largest mortgage services over allegations of foreclosure illegalities.
The new alliance between Masto and Harris also comes as Bank of America Corp., JP Morgan Chase & Co. and three other financial institutions are working toward a deal with attorneys general who are working to gain relief for consumers wronged by faulty mortgage servicing and foreclosure practices.
Harris formally withdrew from those talks in September. Masto said that she is monitoring the talks to see whether it would be beneficial for Nevada to join in any proposed settlement.
She told reporters Tuesday that her position wouldn’t hinder Nevada “from moving forward on what we have to do for our state.”
Masto has expressed her opposition to any settlement that would grant banks broad relief from continuing mortgage investigations, especially if it could affect the state’s own civil and criminal investigations.
When asked about states taking the lead while the U.S. Department of Justice has been criticized for not taking action, Masto promised to hold bank and mortgage company executives responsible for wrongdoing, regardless of their stature.
“We use the tools and resources available to us that’s state law,” Masto said. “It would be wonderful to have the federal government beside us, but that’s not the case.”
Harris said she was “looking forward to forging similar collaborations with other states.”
Last December, Masto sued Bank of America and alleged it violated a 3-year-old loan modification agreement with the state over predatory lending policies by its Countrywide unit.
Masto’s lawsuit, which was amended in August, alleged that the nation’s largest lender filed foreclosures against homeowners with pending loan modification requests after agreeing not to do so. She also alleged the bank had raised interest rates on troubled borrowers after agreeing to lower them.
At the end of the day, Masto said, “We want to see relief for homeowners.”
