So here’s one lagging mystery about the foreclosure fraud settlement: what becomes of Massachusetts AG Martha Coakley’s lawsuit against five banks over deceptive practices and illegal foreclosures? Now we know.
Coakley says in a release that she got a carve-out over certain types of claims in the suit. Others, however, were extinguished in the settlement.
AG Coakley also secured an additional “carve out” to the agreement to allow her office to continue to pursue further relief in the courts against the banks over two Massachusetts-specific issues. Those claims include initiating foreclosures without holding the actual mortgages (so-called “Ibanez” violations) and allegedly corrupting the land recording system through the use of the Mortgage Electronic Registration System (MERS). The agreement will settle all other claims made as part of AG Coakley’s lawsuit against the five banks filed on December 1, 2011.
“Fixing this foreclosure crisis is one of the most important things we can do to restore a healthy economy,” said AG Coakley. “In Massachusetts, this agreement provides for immediate relief and continued enforcement. The banks will provide an immediate infusion of millions of dollars in relief for struggling homeowners. It also allows our office to continue to pursue our claims against the banks for initiating illegal foreclosures in our state and corrupting our land court system. By no means is this settlement the end of our work seeking accountability and relief, as we are continuing to look at the practices of Fannie Mae and Freddie Mac and are participating in the state-federal task force investigating the practices that led to the collapse of our economy.”
Humorously, Coakley writes at the end that she has already recovered $600 million in relief for Massachusetts homeowners. This settlement will net her a little more than half of that, $318 million.
And it comes at a cost. The “Ibanez” claims are important, as Massachusetts law clearly states that foreclosures without the underlying proof in the documents are illegal. And like other states – New York, Delaware – she can continue her MERS claims. But the deceptive practices are gone. That includes her claim that dual track, the practice of setting up a loan modification for and foreclosing on a homeowner at the same time, is a deceptive practice. That’s gone. And in the servicing part of the settlement, which you can see a draft of here, dual track is merely “restricted.” The banks have to complete a nominal review of a loan modification application before moving to foreclose.
I would call this a significant giveback for Coakley, and the relief she acquired in exchange is pretty modest. It’s no Kamala Harris portion, put it that way. Granted, Massachusetts doesn’t have nearly the same foreclosure crisis as California.
It will be interesting to see how far Coakley pursues the Ibanez claims, but they arise out of state Supreme Court law and aren’t really applicable nationwide. And the lawsuit is split into several parts now, so I don’t know what that means for its chances.