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December 9, 2011 > Mortgage investigation alliance

Mortgage investigation alliance

Submitted By Office of the California Attorney General

Attorneys General Kamala D. Harris of California and Catherine Cortez Masto of Nevada announced on December 7, 2011, that their states have entered into a joint investigation alliance designed to assist homeowners who are victims of misconduct and fraud in the mortgage industry.

California and Nevada will combine investigative resources, including litigation strategies, information and evidence gathered through their respective ongoing investigations, assisting each state as it pursues independent prosecutions.

This alliance links the offices' civil and criminal enforcement teams, facilitating the full, fair and adequate investigation of wrongdoing in the two states, which have experienced similar foreclosure and mortgage fraud crises.

"The mortgage crisis is a man-made disaster that has taken a heavy toll on the country but saved its worst for California and Nevada," said California Attorney General Kamala D. Harris. "The mortgage crisis is a law enforcement matter and we shall prosecute to hold culprits accountable and protect homeowners who are targets of fraud. I'm delighted California and Nevada are entering into this alliance to leverage the best results for our investigations and look forward to forging similar collaboration with other states."

"I'm pleased to join forces with General Harris to fight against fraudulent mortgage and foreclosure practices that continue to devastate lives, homes and the economy in Nevada and California," said Nevada Attorney General Catherine Cortez Masto. "This strong partnership will allow our states to make an even more concerted effort to hold fraud perpetrators accountable and ensure law-abiding homeowners receive justice."

By most objective measures, California and Nevada have been hardest hit by the nation's foreclosure crisis. In October 2011, Nevada and California ranked first and second, respectively, for the percentage of their housing units that entered the foreclosure process, reflecting a parallel surge in foreclosures in the two states. One in every 180 Nevada properties entered the foreclosure process in October, and one in every 243 California homes received a filing that month. In 2010, California led the nation with a total of 546,669 foreclosure filings (4 percent of the state's housing units), while Nevada led the nation with 9.4 percent of its homes receiving a foreclosure filing (totaling 106,160 units).

The crisis in these Western states is similar because both share a foreclosure system in which a bank can foreclose on a borrower's home without court oversight, also called "non-judicial foreclosure." The collective result has created a rich opportunity for predators, leading both states to make mortgage-related law enforcement action a top priority.

In May 2011, Attorney General Harris formed a Mortgage Fraud Strike Force, comprising nearly 40 attorneys and investigators, that has launched a wide series of investigations and litigation. The Mortgage Fraud Strike Force has instigated legal actions in cases including a fraudulent multi-million dollar "mass joinder" lawsuit, operated by the law firm Kramer and Kaslow, and the arrests in early December 2011 of three top officers of a Stockton real estate company who took thousands of dollars in up-front loan modification fees and made false promises to assist struggling Central Valley homeowners lower their mortgage payments.

In 2007, Attorney General Masto formed the Nevada Mortgage Fraud Strike Force that launched a wide series of investigations and litigation into areas including violations of the law related to mortgage lending, servicing and foreclosure practices and the creation, rating, marketing, sale and management of mortgage backed securities. The Nevada Mortgage Fraud Strike Force has taken action against predatory "mortgage rescue" companies and individuals claiming to offer services to stop foreclosures. Last month, the Strike Force announced the indictments of Gerri Sheppard and Gary Trafford, who led a massive robo-signing scheme which filed tens of thousands of fraudulent documents. Nevada is also suing Bank of America and its subsidiaries, including Countrywide, for violations of a Consent Judgment for mortgage servicing and mortgage origination irregularities.

The Mortgage Investigation Alliance is the product of weeks of discussion between Attorneys General Harris and Masto regarding the most effective and efficient means of achieving justice for their respective states.

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