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Washington state joins in probe of questionable foreclosure practices

State joins 48 other states in investigating suspected illegal practices in the mortgage industry.

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By Mike Benbow
Herald Writer
Many people in danger of losing their homes through foreclosure could get at least a temporary reprieve as state regulators investigate a number of suspected illegal practices in the industry.
State Attorney General Rob McKenna said Wednesday that he's sent letters to 52 foreclosure trustees calling on them to suspend any questionable foreclosures in Washington state.
McKenna and Scott Jarvis, the director of the state Department of Financial Institutions, said Washington has joined 48 other states in banding together to investigate foreclosures after seeing a number of dubious practices.
They include practices such as so-called robo-signing, or signing documents without confirming their accuracy as required by law. Robo-signers could be prosecuted for perjury.
“These allegations of robo-signing are but one example of questionable actions in Washington state,” Jarvis said.
In his letter, McKenna noted that the signatures of some foreclosure trustees vary widely from document to document. “This appears to be happening even though signatures are notarized with a statement that the signer is the actual person standing before the notary,” McKenna said.
He also noted that his office has discovered examples of what he called reverse-engineering, in which documents were backdated to make it appear that a mortgage loan was passed from one company to another.
Lenders also have not consistently told homeowners of their right to explore options other than foreclosure, McKenna said. He noted that home buyers between 2003 and 2007 have the right to mediation and that the loan owner must schedule a face-to-face meeting in 14 days for people who request it.
McKenna said he wrote to the trustees because state law requires them to ensure that foreclosures are done properly.
“Consequently, I ask you to suspend all foreclosures in which you have not yet confirmed that all foreclosure-related document were lawfully signed, that the chain of ownership is clear and has been revealed to you in full, and the state consumer protection requirements have been followed,” he said.
Employees of several major lenders have acknowledged in court depositions that they signed thousands of foreclosure documents without reading them as required by state laws.
Legal experts say the investigation will certainly put a halt to many foreclosures as banks verify the related documents. It could also temporarily boost home prices as fewer low-price homes go on the market.
JPMorgan Chase announced Wednesday that it has expanded its review of foreclosures in 41 states to about 115,000 cases, up from 56,000.
The company had earlier stopped proceedings in the 23 states that require judicial review of foreclosures and now is looking into similar deals in states where there “could possibly be an issue,” spokesman Joseph Evangelisti said.
McKenna said he is naming consumer protection lawyers Jim Sugarman and David Huey to join the multi-state group investigating foreclosures. Jarvis said he had named Deborah Bortner, head of his division of consumer services.
People facing foreclosure should call the state Homeownership Information Hotline at 877-894-4663 for a referral to a free housing counselor or legal help. Other help is available at
The Associated Press contributed to this story.
Story tags » Financial & Business ServicesReal EstateFederal



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