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Obama vetoes foreclosure bill as anger grows

During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and government officials are taking action after discovering that many mortgage documents were mishandled.

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Washington Post Staff Writers
Friday, October 8, 2010

President Obama stepped into a growing political furor over the nation's troubled foreclosure system Thursday by vetoing a little-known bill that critics say would have made it easier to evict homeowners who missed their payments.

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The decision to block the measure, which Congress passed without debate, came as members of the president's own party have urged the administration and federal regulators to more actively address the crisis over flawed foreclosures.

Meanwhile, attorneys general from about 40 states vowed to band together to investigate reports of fraudulent documents and of banks seizing property without having clear ownership of the mortgages.

At least 10 states - with Iowa and Delaware being the latest - are seeking to expand a voluntary freeze on foreclosures by some of the nation's largest mortgage lenders to include more companies and more regions. And calls have increased for a nationwide moratorium - a move that could deal a blow to the earnings of big banks and grind to a halt the sale of millions of properties in foreclosure.

In the middle of a heated election season, a growing number of politicians have been eager to weigh in on the matter - and are taking pains to rebuke the financial institutions at the core of the controversy.

Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, called Thursday for the national freeze, and Senate Majority Leader Harry M. Reid (D) demanded that big lenders stop foreclosures in his home state of Nevada.

This week, House Speaker Nancy Pelosi (Calif.) and other key Democrats called for federal investigations of allegations that mortgage lenders improperly evicted people from their homes.

But Democrats were trying to figure out Thursday how they allowed a bill to pass that critics say would introduce more fraud into the system, a Pelosi staff member said. It was sponsored by Rep. Robert B. Aderholt (R-Ala.), the first measure he sponsored that passed.

Even he was surprised that it passed, his spokesman said.

"There is absolutely no connection whatsoever between [the bill] and the recent foreclosure documentation problems," Aderholt said in a statement.

The vetoed bill, which is two pages, would have required local courts to accept notarizations, including those made electronically, from across state lines. Its sponsors said it was intended to promote interstate commerce. Lawmakers saw no problems when the House approved it in April by a voice vote, which leaves no record of votes. The Senate passed the bill unanimously last week.

But as the lack of a proper paper trail in mortgage documents came to light, the idea of relying on electronic notaries triggered protests from real estate lawyers and consumer advocates. Relying more on electronic notaries, they warned, could allow more fraud into the system.


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