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The lawsuit recently filed by Massachusetts Attorney General Martha Coakley against five national banks and a national mortgage registration system for allegedly illegal foreclosure practices in Massachusetts is one of a handful of public law enforcement cases challenging banks’ mortgage practices. Similar cases have been brought by the attorneys general of Delaware, Nevada and Arizona. Commonwealth of Massachusetts v. Bank of America N.A., filed in Suffolk County Superior Court in Massachusetts on Dec. 1 names five banks: Bank of America, Wells Fargo, JPMorgan Chase, Citibank, and GMAC Mortgage. It also names Mortgage Electronic Registration System Inc. (MERS) and its parent Merscorp Inc., which runs a national mortgage electronic registration system that facilitates mortgage loan selling and trading. The lawsuit claims the five banks used fraudulent documentation in foreclosures, including so-called “robo-signing”; foreclosed without the actual mortgage documentation; undermined the state’s land recording system through the use of MERS; and failed to uphold loan modification promises to Massachusetts homeowners. The state is seeking civil penalties of $5,000 for each violation of the Massachusetts Consumer Protection law, restitution for borrowers and compensation for registration fees that were avoided. The state also wants injunctive relief requiring the banks to cure title defects and to follow Massachusetts law when registering future mortgage assignments and other documents. “The single most important thing we can do to return to a healthy economy is to address this foreclosure crisis,” stated Coakley in a press release about the case. “Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law. Our action today seeks real accountability for the banks’ illegal behavior and and real relief for homeowners.” The case is similar to private litigation that Boston-based Roddy Klein & Ryan has brought for many years, said Gary Klein, a litigator at the firm. “My sense is it will add to the pressures that are building up on the banks to put remedies in place,” Klein said. The big difference between a plethora of similar private litigation and the Coakley case is “it’s an attempt to fix the problem on a huge global scale as opposed to on a mortgage-by mortgage basis,” Douglas Salvesen, a shareholder at Boston-based Yurko, Salvesen & Remz. Salvesen has represented the Real Estate Bar Association for Massachusetts Inc. “I personally think she’s to be applauded for stepping into a breach to try to address systemic problems that were caused by lending practices over the last decade that so far nobody else has been trying to fix,” Salvesen said. Among a handful of other cases brought by a state attorney general is one filed in October by Delaware Attorney General Beau Biden in Chancery Court against Merscorp and MERS for allegedly violating the state’s deceptive trade practices act. Last December, Nevada Attorney General Catherine Cortez Masto brought a suit similar to Coakley’s against Bank of America and subsidiaries and Countrywide Financial Corp. and subsidiaries in Nevada state court. The case was removed to the District of Nevada in February. Arizona Attorney General Terry Goddard also filed a case last December in Maricopa County Superior Court, State of Arizona, State of v. Countrywide Financial Corporation et al Maricopa County Superior Court. That case is also against Bank of America and subsidiaries and Countrywide and subsidiaries. In an e-mailed response, Citibank spokesman Mark Rodgers stated that the company has been cooperating with Coakley. “We believe we have operated appropriately, in compliance with existing laws, and will defend our actions vigorously,” Rogers stated. “Since the beginning of 2007, we have helped more than 1.1 million customers avoid potential foreclosure and remain in their homes.” Also in an e-mail, GMAC Mortgage stated that the company “has worked in good faith with the Massachusetts Attorney General’s office over the last year to discuss matters related to loan servicing and foreclosures in that state and ways to assist borrowers in financial distress.” GMAC Mortgage stated that the company has modified more than 745,000 loans 2008, or about 27 percent percent of loans serviced during those years. In a statement, JPMorgan Chase said it is “disappointed that Massachusetts would take this action now when negotiations are ongoing with the attorneys general and the federal government on a broader settlement that could bring immediate relief to Massachusetts borrowers rather than years of contested legal proceedings.” Janis Smith, Merscorp.’s vice president for corporate communications, said that the limited lawsuit allegations that apply to MERS “hang on broad and ambiguous language from a statute that’s over 100 years old. We believe it has no applicability to MERS’ business model or its conduct of business in Massachusetts, which has been repeatedly validated by courts in the state.” Bank of America spokesman Lawrence Grayson said the company “continues to believe that collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic recovery. We are working closely with the Department of Justice, state Attorneys General and other agencies to reach a fair and comprehensive solution to these critical issues.” Wells Fargo did not immediately respond to a request for comment. Sheri Qualters can be contacted at [email protected].

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