Attorneys general in all 50 states have formally launched a joint investigation into allegations that mortgage companies violated foreclosure filing laws, according to The Associated Press.

UPDATE: Early Wednesday, 49 states announced a joint investigation into allegations of widespread foreclosure fraud. On Wednesday afternoon, Alabama joined the investigation. The federal government has not yet announced plans to issue a nationwide foreclosure moratorium. Ten states have already started in-depth investigations of foreclosure filings.

Legal and financial industry officials in the states will look into whether employees at banks performed foreclosures without filling out paperwork properly. The probe could affect hundreds of thousands of homeowners.

“This group has the backing of nearly every state in the nation to get to the bottom of this foreclosure mess,” Iowa Attorney General Tom Miller, who is leading the probe, told The Associated Press.

The wide scope of the investigation could eventually force some of the largest companies in the home loan industry to change the way they do business. Penalty fees and restructuring of the industry could result.

“You can’t take away people’s property rights based on fraudulent evidence,” Ohio Attorney General Richard Cordray said Wednesday in a televised interview with Bloomberg.

Cordray said banks needed to quickly help the government sort out the foreclosure inquiry.

Big Banks Already Cut Foreclosures

The foreclosure freeze has been on the minds of big banks for nearly a month. GMAC Ally in late September halted mortgages in 23 states, knocking over more foreclosure dominoes. Bank of America, Chase and PNC, three of the nation’s largest mortgage processors, all stopped home seizures in the same 23 states. Bank of America took its caution one step further by stopping foreclosures in all 50 states.

The federal government considered issuing a nationwide foreclosure moratorium, but the administration of President Barack Obama decided a nationwide ban on foreclosures would harm the housing market too much. It remains to be seen how much the 49-state investigation will clog the housing market.

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  • Jledin03

    This is a much needed service is to stop foreclosures. I have been victium to illegal foreclosure where Wells Fargo Bank voluntarily dismissed their foreclosure case without prejudice. In Kansas, when a lender fails to foreclose they are required to enter a judgment or journal entry enforcing any liens they have. In my case, there is no judgment of journal entry enforcing a lien, it was dismissed witou prejudice. But, Wells Fargo insists that hey have an enforcable lien. To make matters worse, I obtained the property through probate where I received a trustee’s deed that stated I was given all rights, title and interest in the property which is disharged from liablity for its debts. I sold the property to a third party buyer and he has had a loan on hold for over a year because Wells Fargo refuses to release heir lien or agree to a settlement even though they said the would agree t a settlement. The mortgage is in my father’s name an Wells Fargo issued a1099-C “Cancellation of Debt” in my father’s name which cancelled the enitre mortgage. By Federal Law, Wells Fargo is conducting illegal debt collection by refusing to release the lien and saying I am repsonsilbe for the mortgage debt of my father. I am exempt from any process of law that would encumber my property due to federal laws 26 C.F.R. § 1.6050P-1(b)(2)(i)(B);(D);(E);(F);(G); and(H)(iv). Please tell me Wells Fargo is committing fraud.

  • Sheryl

    Chase lied to me and guaranteed my student loan was deferred but demanded repayment 6 months before I was to graduate and turned my loan into collections. Not cool. I still have until December before I should start repaying. I am not the only student to experience betrayal from Chase.