Nevada attorney general asks lenders to temporarily halt foreclosures

As politicians complain about potentially massive mortgage fraud around the country, a top state official is calling on all residential lenders to halt foreclosures in Nevada.

Attorney General Catherine Cortez Masto on Friday announced that she sent letters to 22 residential mortgage lenders, asking for a moratorium on foreclosures.

Masto's letter urges lenders to "implement a moratorium on all foreclosures, evictions and (repossessed real estate) sales in Nevada" until each can demonstrate compliance with state law.

The letter pointed to national news stories about bank employees "robo signing" affidavits about mortgage documents in judicial foreclosure states without even reading the paperwork or knowing whether the documents were correct.

Most foreclosures in Nevada are handled outside of court. However, Masto wrote that questions about the accuracy of affidavits "taint the entire process and create a negative presumption concerning the accuracy" of mortgage and foreclosure documents in Nevada.

Senior Deputy Attorney General Ernest Figuero said the attorney general is awaiting responses from the lenders about her office's request.

It's not clear what course of action, if any, Masto will take after reviewing information and hearing comments from lenders.

"The robo-signing may constitute a violation of Nevada's deceptive trade practice statute," Figueroa said.

A Chase Bank spokesman declined comment on Nevada's request for a foreclosure moratorium, noting that it earlier stopped foreclosures in 23 states where foreclosures are handled by courts. Nevada wasn't among those states.

"Wells Fargo is not planning to initiate a moratorium on foreclosures," said spokeswoman Natalie Brown. "Our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate."

A spokewoman for U.S. Bank had no immediate comment Friday.

U.S. Bank issued a statement saying that it has no plans to stop foreclosures but said it has well-established controls "to ensure that foreclosure documentation is accurate."

Bank of America on Friday announced it was halting foreclosure sales in all 50 states. A bank spokeswoman said she didn't have estimates of the number of homeowners in Nevada who have loans serviced by the bank or how many people could be affected by the moratorium.

"We will stop foreclosure sales until our assessment has been satisfactorily completed," Bank of America said in a statement. "Our ongoing assessment shows the basis for our past foreclosure decisions is accurate."

Another Bank of America spokesman said the bank would begin rescheduling foreclosure sales once its assessment is completed. He said the bank estimates sales would start being reschedule by Nov. 1 or earlier.

A document obtained last week by The Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed thousands of foreclosure documents a month and typically didn't read them. The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month.

Senate Majority Leader Harry Reid, D-Nev., applauded Bank of America's moratorium decision and asked other major mortgage lenders to suspend foreclosures in all 50 states as well.

"This is good news in what has been a bad time for many Nevada families going through foreclosure or at risk of losing their home," Reid said in a statement.

Banking and housing analysts, however, fear the foreclosure document problems could prolong the already slow recovery in the housing market. Even if foreclosure is inevitable for tens of thousands of homes, the process could now drag out for years.

Congressional efforts to delay foreclosures because of questionably notarized documents will prevent any recovery for the Las Vegas housing market, agreed Rick Shelton, president of the Greater Las Vegas Association of Realtors. He also complained about Reid's recommendation that more banks suspend foreclosure around the country.

Some analysts and real estate agents worry that the uncertainty about the document mess also could make potential buyers change their mind about purchasing foreclosed properties. That's because of fears that the former owners could turn around and sue.

"It's going to make people even more cautious: 'Gosh, do I go in on a foreclosure?'" said San Diego real estate agent Jerry Adams Jr., who said he has seen one sale get put on hold. "It concerns me a lot."

Tisha Black-Chernine, a private attorney who has sued over allegations of wrongful foreclosure, attributed part of the problem to the securitization of residential mortgage loans, in which investors bought and sold mortgage securities much like common stocks. As a result of securitization, banks that service loans often have difficulty identifying and contacting mortgage holders so that a foreclosure can be started.

Banks servicing mortgage loans need to obtain approval from the mortgage holder before starting foreclosures against homeowners, she said.

"The right person has to order the foreclosure, whether it's in court or on the courthouse steps (as is done in non-judicial foreclosures)," she said.

"Foreclosure is an extreme remedy, and, if you don't have your paperwork in correct order, you shouldn't foreclose," she said.

William Uffelman, chief executive of the Nevada Bankers Association, agreed that lenders must be able to identify the owner of the loan in order to foreclose. "I have complete faith the lenders will do that," he said. "It's fundamental. The integrity of the process is essential."

Attorneys general in 40 states may start a joint investigation into foreclosures at large banks and mortgage funds, Bloomberg News reported on Friday.

Black-Chernine said she has conferred with Masto about the issue. "I know that she's doing her own investigation and working with other state attorneys general," Black Chernine said.

Connecticut Attorney General Richard Blumenthal on Friday called for a 60-day moratorium on forecloses.

The Ohio Attorney General Richard Cordray has sued GMAC Mortgage, which is affiliated with Ally Bank, saying the lender used fraudulent affadivits and documents to mislead courts over home foreclosures.

California Attorney General Edmund "Jerry" Brown Jr. called Ally's document review process a "sham," according to the Washington Post.

The Associated Press and Review-Journal writer Hubble Smith contributed to this report. Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.