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State-By-State Measures Increase Pressure On Lenders To Reform Their Foreclosure Practices

Attorneys General in California, Utah, and Illinois have joined other states and federal regulators in taking more aggressive actions against banks and lenders involved in the foreclosure crisis.

Authorities conducting the 50-state foreclosure probe — which is rooted in allegations of falsified documents, illegal practices and improper use of notarizations — continue to issue subpoenas and levy severe penalties against companies who committed fraud.

“What lenders were doing is literally having people sign documents, or machines sign documents … without the presence of a Notary Public and often contrary to state law,” said Maryland Attorney General Douglas Gansler, during the National Notary Association’s 33rd Annual Conference in May. “I, and 48 of my colleagues, believe that constitutes a deceptive act, an unfair practice, or otherwise violates state laws.”

Part of the cause of the foreclosure crisis is that financial institutions and attorneys failed to comply with foreclosure commencement requirements of judicial jurisdictions. Among the violated requirements:

1.) anyone who signs an affidavit, such as affidavits of indebtedness, must have all of the information contained within the document to ensure its accuracy, and;

2.) all affidavits must be executed in the presence of a Notary,

Details of the 50-state foreclosure investigation are still in private talks, but the five largest mortgage services have been warned that they may be served with civil lawsuits upwards of $17 million if they don’t settle the investigation.

“The settlement will hopefully reap another benefit as well,” said Attorney General Gansler, “which is to create a Best Practices scenario so that this type of thing with banks or other corporate organizations doesn’t happen in the future.”

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