Saturday, August 23, 2014
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Will election undermine states' foreclosure probe?

Some key attorney general offices changed hands, but the re-election of Iowa Attorney General Thomas Miller, a Democrat who is leading the multistate investigation, should help keep it on track.

Will election undermine states' foreclosure probe?

Iowa's long-serving attorney general, Democrat Thomas Miller, beat back a challenge to win his eighth term in office, which is good news for homeowners watching the multistate investigation of messed-up foreclosures - an inquiry that Miller is leading.

Wall Street Journal writer Vanessa O'Connell says Miller's re-election may also be good news for those pressing banks to modify mortgages for homeowners who can't sell homes that are considered "under water" - no longer worth the amount the homeowner owes:

Mr. Miller's status as a point man in the multistate investigation has been seen by many observers as a sign that the states will push for a sweeping settlement requiring lenders to implement mortgage modifications allowing homeowners to stay in their houses.

Mr. Miller, who has monitored mortgage-industry practices for years, had already begun discussions with some lenders, including Bank of America. In one meeting last week at Mr. Miller's office, he and officials from other states told Bank of America executives and outside lawyers that state attorneys general would like additional aid to be offered to borrowers, such as further principal reductions on certain delinquent loans where people owe much more than what their homes are worth, according to people familiar with the meeting.

O'Connell said it wasn't entirely clear how changing faces in the AGs' offices might affect the probe, but her story and others, including this pre-election piece in the Washington Independent, have said it was rarely raised as an issue - unlike state challenges to the new federal health-care law:

In six of the 13 states leading the probe, including recently-added Delaware, current attorneys general faced re-election challenges. Ohio Attorney General Richard Cordray, a Democrat who has been outspoken against lenders and the paperwork some of them filed in connection with foreclosures, lost to Republican challenger Mike DeWine. [Beau Biden was re-elected as Delaware's AG on Tuesday, running without GOP opposition.]

Mr. DeWine, a former U.S. senator who had vowed to join the federal challenge to President Obama's health-care reform, will gain control of a lawsuit filed by Mr. Cordray last month against the GMAC Mortgage unit of Ally Financial Inc. Mr. Cordray's lawsuit accused the lender of hundreds of counts of fraud tied to foreclosure documents. GMAC has denied any fraud in its mortgage practices. It has said that it reacted proactively to any "procedural mistakes" in foreclosure filings and pledged to fight the charges.

A campaign website for Mr. DeWine lists job creation and opposing the health-care plan as his top priorities and makes no obvious mention of the foreclosure scandal, the multistate investigation or Mr. Cordray's lawsuit against GMAC.

"Mr. Cordray has been instrumental in uncovering the widespread and epidemic rash of fraud banks have unleashed on homeowners and the court system," said John Sherrod, a Dublin, Ohio, lawyer who has recently filed civil lawsuits against several lenders alleging foreclosure fraud. "Does Mike DeWine share that view?" Mr. Sherrod asked. "I don't know," he said.

Pennsylvania's newly elected governor, Attorney General Tom Corbett, joined the multistate inquiry as it was announced Oct. 13 - the lone initial holdout was Alabama, but even it went along. The new Corbett administration could also have a role in the probe via its Department of Banking: Pennsylvania was one of three states to contribute a top banking regulator to the executive committee of attorneys general overseeing the probe, according to the National Association of Attorneys General.

Jeff Gelles Inquirer Business Columnist
About this blog

Jeff Gelles, who writes the Inquirer's weekly Consumer 14.0 and Tech Life columns, takes a broad look at the marketplace of goods, services, and ideas.

Reach Jeff at jgelles@phillynews.com.

Jeff Gelles Inquirer Business Columnist
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