Texas Attorney General Calls for Suspension of Foreclosures
Texas Attorney General Greg Abbott demanded yesterday that Texas loan servicing companies suspend all foreclosure activities due to concerns about the accuracy of documents.

In a letter sent to 27 companies that maintain mortgage loans in Texas, his office called for the immediate suspension of home foreclosures, of the sale of foreclosed properties and of the eviction of people living in those properties.

The letter asks that companies obey the moratorium at least through Oct. 15, the deadline Abbott established for companies to identify workers who may have participated in unlawful practices and assure the state that those companies are following state laws.

The attorney general’s office is investigating mortgage lenders to determine the “full harm Texas homeowners have suffered,” according to the letter signed by Paul Carmona, chief of Texas’ consumer protection and public health division.

In the letter, Carmona described possible fraudulent practices by lenders, including the signing of thousands of documents per month, often without reading them; the signing of affidavits falsely claiming personal knowledge of facts or falsely claiming the signing party reviewed attached documents; and the notarizing of documents before they were signed or when the signer was not present. The documentation flaws have raised questions in Texas and other states about the validity of title to properties that have already been foreclosed, resold and on which a title insurance policy has been issued.

“We will be pushing forward with our investigation and inquiry,” attorney general spokesman Jerry Strickland said. “This is in the interest of homeowners who are feeling the effects of foreclosures.”

The move comes after several big lenders, including Bank of America, have suspended foreclosures in 23 other states to review whether they have been conducting them properly. Two other big lenders — JPMorgan Chase & Co. and Ally Financial Inc’s GMAC Mortgage — have already suspended foreclosures.

Old Republic National Title Insurance will not write policies on foreclosed Chase and GMAC properties until “the objectionable issues have been resolved,” according to a memorandum sent out by the firm’s underwriting department and obtained by the New York Times. ALTA also released a statement last week regarding the issue.

Through this month, lenders have posted 10,946 homes for foreclosure in Central Texas, according to Foreclosure Listing Service Inc., an Addison company that tracks the market. That is 13 percent more than in the same period of 2009. Almost 70 percent of the postings were for homes valued at less than $200,000.

Rest assured that TLTA is actively engaged in this issue and we will provide updates as there are new developments. If you have any questions in the meantime, please contact Aaron Day, TLTA Director of Government Affairs and Counsel at 512.472.6593.