Massachusetts Attorney General Martha Coakley said on Monday that she will not sign any agreement between attorneys general and big banks that releases the banks from future mortgage related liability.
Coakley's stance could create an obstacle for a settlement that has been in the works for weeks between attorneys general in all 50 states and banks. That agreement is supposed to settle claims of shoddy mortgage and foreclosure practices that were discovered last fall, including document fraud.
Coakley and several other attorneys general believe a release from future liability would hamper their investigation into banks' mortgage practices. Attorneys general from Delaware and New York have already balked at a settlement that would include the release.
"Responsible parties must be held accountable in order to fully protect homeowners and return to a healthy economy," said Coakley.
She is asking state registers of deeds in the state to compile information about suspect mortgage paperwork that has been filed in their offices.
Last week, The Associated Press reported that county officials in Massachusetts, North Carolina and Michigan continue to receive mortgage documents with questionable signatures. Widespread use of fraudulent signatures on mortgage affidavits, also known as robo-signing, led to a temporary halt to foreclosures last fall. Banks said that they would fix the problem. But the registers of deeds say that robo-signing continues to be a widespread problem.
"The AG's investigation sends a message to banks they will be held accountable for the fraud that they have committed," said John O'Brien, register of deeds of Salem, Mass. Since October, when banks promised to stop the practice of robo-signing of mortgage paperwork, O'Brien's office received 1,300 documents with the signature of known robo-signer "Linda Green." It was signed in 22 different ways and attached to many different titles.
Coakley' investigation is separate from an investigation of bank mortgage practices being conducted jointly by all 50 state attorneys general. That investigation is being led by Ohio attorney general Tom Miller. Other attorneys general _ including those in Illinois, New York and California _ have also launched their own investigations.
The Miller-led probe is said to be close to a settlement, estimated at $20 billion or more. But observers say it has been hampered by banks' demands that it include a liability release. Such a release would give the banks protection from further state investigations like Coakley's. It would also release them from fallout that could come from future federal investigations into their mortgage practices, including faulty paperwork still being found and securitization of loans.