State banking regulators and several attorneys general are forming a multi-state task force to investigate the nation's foreclosure crisis, zeroing in on whether servicers cut corners on their paperwork.
Formation of the task force comes two weeks after several megabanks temporarily halted foreclosures and announced they were reviewing how they file affidavits, assignments, and other documents in state run courts.
The number of states that have decided to participate in the investigation will be announced on Wednesday, said Geoff Greenwood, a spokesman for Iowa AG Tom Miller.
State officials have until the close of business on Tuesday to sign on to the effort.
"Certainly there is going to be an inquiry into industry practices," Greenwood said. "But in terms of where it goes from there it is a little hard to say."
However, AG Miller has not called for a national moratorium on foreclosures and has asked only three major servicers -- Bank of America, GMAC Mortgage, and JPMorgan Chase -- to halt foreclosures in Iowa.
It will be the multi-state executive committee's job to decide how many servicers should be queried for information.
"There will be one large request on behalf of all of these states. So it will be more efficient for the companies and more efficient for the states," Greenwood said.
State AGs have formed multi-state task forces in the past to pursue cases against subprime lenders such as Ameriquest, and to monitor loan modification efforts by servicers.
In other foreclosure scandal news, California State Assemblyman Ted Lieu, a Democrat from Torrance, has asked two state regulatory agencies to temporarily halt foreclosures for 60 days and launch an investigation into the practices of mortgage servicers even though California is a non-judicial foreclosure state.
California accounts for 15% to 20% of all outstanding residential loans in the U.S.
Lieu recently sent letters to the commissioners of the state's Department of Financial Institutions, and Department of Corporations, asking that they adopt the temporary moratorium in California "so they can investigate whether the lenders in California are failing to follow the law."
Lieu authored a California law that prohibits lenders from recording notices of default on mortgages made between Jan. 1, 2003, and Dec. 31, 2007, unless the lender contacts or tries diligently to contact the borrower to determine eligibility for a loan modification. A notice of default must include a declaration of compliance with that law.
"California does have laws that also require certifications by the lender before a foreclosure can proceed," Lieu said in the letters.
In California, when a homeowner does not cure a default, a notice of sale is recorded and published, and the property is then auctioned off to the highest bidder.
