By Steve Viuker
In a tone that echoed a long-ago New York attorney general named Dewey, Eric Schneiderman told a packed breakfast at the Roosevelt Hotel of his plans for cleaning up the financial mess.
“When I first took office, there was an effort by the states to resolve issues such as robo-signing in the foreclosure process,” he said at the breakfast on Feb. 16, sponsored by Crain’s New York. “I believe deregulation went too far and many safety features were taken off the system. And folks took advantage of it. There was a big push for people to refinance their homes and everything was rolling along. In 2004, interest rates began to rise and you would think the market would go down. But the amount of questionable loans went up and the quality of the securities declined.”
Schneiderman said he objected to releasing the banking community from the “misconduct that lead to the bubble and the crash of the American economy. The mortgage-backed security market was inflated and collapsed and caused economic devastation. We have to clear the air and the housing market. The majority of Americans believe that somebody got away with something. And they’re painting Wall Street with a very broad brush.”
He also sued Bank of America, Wells Fargo and JPMorgan Chase, accusing them of fraud in their use of an electronic mortgage database that he said resulted in deceptive and illegal practices, including false documents in foreclosure proceedings. The MERS database contains more than 70 million mortgage loans, including millions of subprime loans. Schneiderman is seeking all profits obtained through fraudulent and deceptive practices and other damages, including $5,000 for each violation of general business law. Regarding his lawsuit, Schneiderman praised the system of reporting property. His concern was deregulating to the point of recklessness. “You never want to have a question of whether you have title to a piece of property,” he emphasized.
And New York state is planning to speed foreclosure cases. According to the New York Times, the plan includes an unusual agreement by four banks to send representatives to court who can approve loan modifications. According to The Times, the program is to start in Queens this spring and then expand around the city and to nearby suburbs. Judges would take over the running of some settlement conferences from court attorneys, who lack the power to impose punishments. The officials said the plan would also include court supervision of the collection of the required documents to try to avoid delays and would seek to shorten the time some foreclosure cases linger in the courts. In addition, courts would work to assure that homeowners who cannot afford lawyers are represented.
If it is successful, the plan would be expanded across the state next year. A possible source of funding for lawyers could be New York’s $136 million share of the recently negotiated national mortgage settlement. The funds are to be controlled by Schneiderman. In a statement, the Attorney General said that he planned to use a significant portion of the money for homeowners’ lawyers and housing counselors.