2 attorneys general subpoena companies in foreclosure probes

May 25, 2011

Attorneys general in Illinois and California expanded their investigations into problems within the mortgage servicing industry Wednesday, issuing subpoenas to companies that help manage the flow of troubled loans.

The move was the latest attempt by state attorneys general to ramp up pressure on mortgage servicing firms, which for months have faced scrutiny for shoddy foreclosure practices and have been engaged in multibillion-dollar settlement negotiations with state and federal law enforcement officials.

Illinois Attorney General Lisa Madigan issued subpoenas Wednesday to two Florida-based firms, Lender Processing Services Inc. and Nationwide Title Clearing Inc., seeking information about their business practices in light of allegations of “robosigning” and other shortcuts that became common within the industry.

“Foreclosure became a rubber-stamping operation that robbed many homeowners of the American Dream without a fair and accurate process,” Madigan said in a statement.

California Attorney General Kamala Harris also subpoenaed LPS, seeking data dating to 2007. “California homeowners have been exposed to fraud and crime at every step of the mortgage process,” Harris said in a statement, vowing to continue looking for “inaccurate or unjust foreclosures."

A representative for LPS could not be reached to comment. A spokeswoman for Nationwide Title Clearing said the company had not yet been served a subpoena but intended to cooperate “to the fullest extent of the law” in order to “clear up common misconceptions” about the firm, which among other services prepares mortgage assignments.

Meanwhile, other states have continued to press firms for more data and deeper explanations of their practices during the housing bust and foreclosure crisis.

New York Attorney General Eric Schneiderman has sought meetings with seven top banks as part of an investigation into how the financial industry bundled and sold mortgage securities. He also has subpoenaed four bond insurers for information related to claims paid on mortgage-backed securities and any litigation and settlements entered into with the banks.

In addition, attorneys general in two other states separately sent letters to Bank of America regarding foreclosures. Connecticut’s attorney general said that the firm wasn’t doing enough to help distressed homeowners, while Utah’s alleged that one of the bank’s units had not complied with state laws in its foreclosure practices.

The expanding state actions come as a coalition of attorneys general and a collection of federal officials have tried to hammer out an agreement with the nation’s five largest servicers to overhaul their business practices.

Brady Dennis is a national reporter for The Washington Post, focusing on food and drug issues.
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