By
Kenneth Long on December 1, 2011
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In a sign that Massachusetts plans to take unilateral action against big banks over the mortgage crisis, Attorney General Martha Coakley announced that she filed lawsuits against some of the biggest targets in the mortgage industry.
Lawsuits have been filed against Bank of America, Wells Fargo, Citi, Ally Financial and JPMorgan Chase. Coakley's office alleges that unlawful foreclosures were committed as a result of fraudulent or flawed practices committed by bank personnel.
Robo-signing may be responsible for the largest percentage of wrongful foreclosures committed by the mortgage lenders. Instead of individually verifying each case, bank personnel were reportedly instructed to summarily sign affidavits attesting to the validity of each case. These signed affidavits were presented in courts of law to prove the banks' ability to foreclose on properties that had fallen into default.
It is this practice of robo-signing that caused banks to push some homeowners into foreclosure who were not actually behind in their payments. Some foreclosures even
affected military personnel who should have been protected by the Servicemembers Civil Relief Act while on active duty.
Chase was one such offender who was chastised for wrongful foreclosures on military service members. They paid $56 million to settle allegations of
SCRA violations.
While Coakley's action against the banks was not a surprise, it did come as a shock that she would file individual lawsuits rather than pursue a joint settlement with other states. Her office reported that Massachusetts would be the first state to pursue a settlement so strongly with the banks.
Banking stocks indeed have still been hammered because of the uncertainty in legal actions that are still outstanding. Most investors expect billions to still be paid out to settle allegations of wrongdoing. Coakley's action means that it could take even longer to resolve the situation if individual states pursue action on their own.