State Attorneys General Take Tough Stance on Mortgage Reform

By Kyle Chezum Updated on 3/18/2011

A task force of 50 attorneys general has spent countless hours investigating allegations levied against major mortgage servicers, gathering evidence of dubious foreclosure practices and errant document handling.  The team will soon begin talks with the accused institutions to try and reach a punitive settlement.  And the attorneys general are ready to play hardball.

The task force stated that it expects lending institutions to radically redesign the way mortgages are serviced, and that any settlement offer that doesn’t include such systemic alterations will be flatly rejected.

Iowa Attorney general Tom Miller, the designated leader of the investigation, claims the team is simply trying to make the system work.  “We're trying to shift the servicing industry from [being] a dysfunctional one to a functional one,” he said.  “If we can get something that changes the direction of servicing, then that’s what we’ll do. If we don’t, then we’re not going to settle.”

Despite this tough stance, Miller expects the team will reach a settlement with banks swiftly.  The settlement will include specific regulations designed to make loan modifications more accessible to borrowers.  Banks claim that such regulations could cause significant issues and raise questions of fairness, as modifications will never be available to all borrowers regardless of enhanced regulations.

Negotiations will likely begin within the next few weeks.  “Time really is of the essence,” Miller said.