A handful of state attorneys general are taking a hard line with mortgage servicers by demanding loan modifications and principal reductions for those borrowers whose rights may have been violated by robo-signing.
All 50 states, as well as 39 state bank regulators, joined forces earlier this month to investigate whether servicers improperly submitted affidavits or other documents in the foreclosure process.
Lawyers representing some of the largest banks said a few attorneys general may break from the coordinated multistate effort and demand that servicers modify loans for borrowers already in the process of foreclosure.
Andrew Sandler, a co-chairman of BuckleySandler LLP, said servicers will rebuff attempts by individual attorneys general to make changes to loan terms since they are not related to the issue of robo-signing, the practice of endorsing affidavits without verifying the information or having a notary present.
"If the AGs seek loan modifications as a remedy for technical deficiencies, there likely would be litigation," Sandler said.
So far, an executive committee of 12 state attorneys general and three state banking regulators led by Iowa Attorney General Tom Miller has met just once through a conference call.
Geoff Greenwood, a spokesman for Miller, declined to discuss the internal deliberations.
"Because of the number of attorneys general involved, there will be different proposals and ideas, and that's part of this process, to come out with the best resolution possible for consumers and lenders," Greenwood said.
