SALT LAKE CITY -- Utah's Attorney General is joining officials in all 50 states to launch an investigation targeting possible fraud in the mortgage industry.
The probe will examine allegations mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners. It targets major U.S. lenders, but some analysts worry that it could add strain on an already distressed housing market.
The allegations are that lenders repossessed homes without ever verifying key details. Agents signed off on hundreds of thousands of foreclosures without reviewing critical documents -- a process known as "robo signing."
Iowa Attorney General Tom Miller is one of those leading the investigation.
"The robo signing is the key issue -- the issue that triggered this investigation -- and is a very significant problem that has to be solved," Miller says.
Julia Borst, president of Utah Mortgage Lenders Association, says while the problem may be large she does not think there was criminal intent behind it.
"Do I think it's widespread? I don't think it's widespread fraud, no I don't," Borst says. "Do I think that there could be paperwork issues due to the sheer numbers? I do."
Utah's attorney general's office says one of the objectives of the preliminary investigation is to evaluate potential remedies for victims.
"We just want to insure, from a state perspective, that the companies in this business are following the law and that every Utahn who has a mortgage problem is able to count on the fact that the rule of law will prevail, that people will be required to follow those rules," says Chief Deputy Attorney General John Swallow.
Swallo says it's very early in the process and emphasized that Utah does have many professional financial institutions.
Meanwhile, Borst says beyond the 50-state probe, struggling homeowners should realistically assess the situation.
"Figure out for you, can you afford your house?" she says. "And if you can make your payments, figure out how to make your payments. If not, figure out what life after is going to look like and move on down the road."
In August alone, a record 95,000 U.S. homes were repossessed. Currently, nearly one in every seven Americans with a mortgage is either behind on payments or currently in foreclosure.
October 13th, 2010 @ 5:31pm