Gansler: Victim compensation fund is speculative
Posted: 7:58 pm Wed, November 17, 2010
Daily Record Legal Affairs Writer
State attorneys general and major mortgage lenders are a “long way” from reaching a settlement in the prosecutors’ investigation of “robo-signing” and other alleged activities that have brought the legitimacy of thousands of foreclosures into question, Maryland Attorney General Douglas F. Gansler said Wednesday.
Gansler’s statement followed a news report that attorneys general from the 50 states and Washington, D.C, were discussing with lenders the possible formation of a fund to compensate victims of improperly executed foreclosures.
The possible creation of a victim compensation fund drew criticism from Peter A. Holland and Phillip Robinson, two Maryland attorneys in a foreclosure case against lenders. They said such a fund would provide no remedy to people who want their homes back and might enable lenders to conceal the extent of their impropriety.
But Gansler called the report in Wednesday’s Washington Post premature, tamping down speculation that a settlement is near.
“Reports that the Mortgage Foreclosure Multistate Group is close to reaching an agreement with major servicers are simply incorrect,” he said.
“While we are engaged in a dialogue with the servicers, and have been for the past several weeks, this is an ongoing discussion of very complicated issues with all of the major stakeholders,” Gansler said through his spokeswoman Raquel Guillory.
“Finding solutions to the numerous and complicated problems plaguing mortgage loan services will take some time,” he said. “The multistate group [of attorneys general] is a long way from reaching any potential settlement with any party.”
Alleged improprieties under investigation include foreclosure affidavits not actually signed by the person whose name appears on the papers or documents that contained unverified or false information.
In its report, The Post stated the compensation fund under discussion would mirror those established in response to the BP oil spill in the Gulf of Mexico and the Sept. 11, 2001, terrorist attacks.
These funds enable victims to receive money only if they waive all other claims against defendants, a prospect Holland and Robinson decried.
“What’s in it for the homeowner?” asked Holland, who heads the Consumer Protection Clinic at the University of Maryland School of Law.
“What about the homeowner whose house was taken away fraudulently?” asked Holland, a visiting professor at the law school. “Will they have a right to go to court and try to get their house back?”
He added that creating a settlement fund could forestall further investigation of the lenders’ activities. Thus, the money placed in the fund might undervalue the magnitude of the impropriety and shortchange victims.
A prematurely created fund would be akin to “another bailout, another too-big-to-fail,” Holland said.
Robinson, executive director of Civil Justice Inc., said a victims’ compensation fund negotiated by attorneys general and lenders would not enable foreclosed homeowners to recover their homes.
“The attorney general doesn’t represent homeowners,” Robinson said. “He represents the state of Maryland.”
Holland’s clinic and Robinson’s Civil Justice joined last month in filing motions in pending foreclosures in Baltimore City and Montgomery County circuit courts. The attorneys allege Jeffrey Stephan of GMAC Mortgage and Xee Moua of Wells Fargo lacked personal knowledge of facts in affidavits they signed. Both gave depositions last year in Florida foreclosure cases, stating they signed hundreds of documents a day, only making sure the spellings of their names was correct.
Attorney William M. Savage, who represents the banks’ substitute trustee in the Montgomery County case, declined to comment on the possibility of a victim-compensation fund. Savage is with Shapiro & Burson LLP in Fairfax, Va.