- "This must be about reform," California's attorney general says
- Nevada and California ranked 1-2 last month in foreclosure percentages
- Nevada had 9.4% of its homes in foreclosure last year
- California had 4% of its housing units in foreclosure last year
Saying their states are hardest hit by the nation's foreclosure and mortgage crises, the attorneys general of California and Nevada formalized Tuesday a joint investigation alliance to help homeowners victimized by fraud, officials said.
California Attorney General Kamala D. Harris and Nevada Attorney General Catherine Cortez Masto said they are willing to partner with other states and provide support as California and Nevada investigate how pervasive is fraud in foreclosures and mortgages.
Harris said she has heard anecdotal stories during town hall meetings throughout the state about misconduct in the origination, servicing and foreclosure portions of the mortgage industry.
"That is part of our investigation, is to see how pervasive is the fraud," Harris told reporters at a news conference Tuesday morning.
Their joint probe, during which the two states will share information, subpoenas and witnesses, will also seek reforms to protect homeowners, the officials said. Harris described the mortgage crisis as nationwide "man-made disaster" that has inflicted its worst toll on California and Nevada.
So far, the alliance has produced "millions of pages of documents" and the development of mutual targets for investigators, officials said.
A multiple-state initiative is under way to seek a settlement with the nation's five largest banks on alleged mortgage abuses, but California backed out of that arrangement in September because officials were concerned about whether the settlement would be "sufficient" for the state's property owners, Harris said.
Masto said her state is monitoring the initiative to see what the final terms are.
California and Nevada officials are looking at a range of alleged misconduct by mortgage institutions and others.
"What we also know is that the investigations and our actions relate not only to these institutions who commit wrongdoing but also the predators that have evolved around the distress and the crisis," Harris said. "We have seen other scams that have involved brokers and lawyers and others who are taking advantage of distressed homeowners who are simply trying to do everything and anything they can to keep their homes."
Las Vegas has seen a rental scam in which a person has fraudulently told homeowners in foreclosure that he is authorized to rent out their homes, and renters have moved in unwittingly, Masto said.
"This crisis is causing great havoc in the local economy in Nevada," Masto said. "Families are being forced out of their homes. Vacant homes are being vandalized.
"Our goal is to accelerate our investigations and to investigate harm that bad actors have done in both of our states," Masto said.
Added Harris: "We believe there must be accountability and consequence associated with this crisis. We also believe that there must be meaningful relief for those involved in foreclosure and modification. And finally, this must be about reform so that whatever has happened will never happen again."
Nevada and California have been hardest hit by the foreclosure crisis because the two states share a similar system in which a bank can foreclose on a borrower's home without court oversight, a process called "non-judicial foreclosure," officials said.
The foreclosure process in California can be completed in as few as nine months, Harris said.
In October, Nevada and California ranked No. 1 and No. 2 for the percentage of housing units in foreclosure, "reflecting a parallel surge in foreclosures in the two states," officials said.
In Nevada, one of every 180 properties entered into foreclosure in October, officials said.
In California, one of every 243 homes received notice of a foreclosure filing, and in 2010, the state led the country with a total of 546,669 such filings, or 4% of the state's housing units, officials said.
Nevada led the country with 9.4% of its homes going into foreclosure in 2010, officials said.