Four national banks agreed to pay a combined $2.7 million in penalties to resolve claims that they unlawfully foreclosed on properties in Massachusetts, according to an announcement from Massachusetts Attorney General Martha Coakley.
Bank of America, Citi, JPMorgan Chase, and Wells Fargo were accused of violating Massachusetts foreclosure laws and the Massachusetts Consumer Protection Act by foreclosing on properties in the Commonwealth when they did not hold the rights to the mortgages, and therefore did not legally have the right to foreclose.
In addition to paying the monetary penalties, the four banks will undertake obligations to facilitate the repair of defective property titles.
"Our continued work to address illegal foreclosures in Massachusetts plays an important role in ensuring liquidity in our housing market and providing relief to homeowners who purchased properties with defective titles," Coakley said. "This settlement holds these four national banks accountable for violating state law and cutting corners in the foreclosure process."
The Massachusetts AG office alleges in the amended complaint that the four banks ignored a fundamental legal mandate established in the Supreme Judicial Court's Ibanez decision in January 2011 that mortgagees must strictly comply with the Commonwealth's foreclosure laws. The Massachusetts foreclosure law states that a mortgage is void if whoever initiates the foreclosure does not hold the mortgage through valid assignment or is not the mortgagee of record at the time the foreclosure notice is published.
The complaint further alleges that the four banks did not obtain a valid assignment of the mortgage prior to publishing foreclosure notices on the properties and therefore the foreclosures should be invalidated. Also according to the complaint, the banks' actions adversely affected the marketability and insurability of titles to numerous properties in the Commonwealth.
As part of the settlement, the banks will be required to assist consumers who claim the title to his or her residence is void from an unlawful foreclosure. Assistance will likely include conducting a thorough title review, providing curative documents, releasing junior leans held by banks, and paying costs associated with the title cure in cases where consumers do not have title insurance, according to the Massachusetts AG office. Out of the $2.7 million penalty, the AG's Local Consumer Aid Fund will receive $700,000 to be put toward further consumer assistance. The Commonwealth's General Fund will receive the remaining $2 million.