Friday, Dec. 16, 2011

Our View: Probe must hold lenders accountable

When Attorney General Kamala Harris pulled California out of nationwide settlement talks with big banks over the foreclosure debacle, it left a big question: What would her next move be?

Now we know, and it offers renewed hope that distressed homeowners will get substantial aid, and that abusive lenders will finally be held to account.

Harris announced this week that she's joined forces with Nevada Attorney General Catherine Cortez Masto to investigate mortgage fraud and misconduct. While the two offices will pursue their own prosecutions, they will share legal strategy, evidence and resources. Harris is keeping open the possibility of other states signing on as well.

Both Harris and Masto are aggressively going after the "robo-signing" of foreclosure documents without actually reviewing individual homeowners' files. Wisely, the attorneys general are also targeting companies that prey like vultures on homeowners with bogus rescue schemes.

While there's no definite timetable to complete the inquiry, the alliance is supposed to accelerate a resolution.

Relief can't come soon enough. The two states have been the hardest hit by the housing collapse. In both states, lenders can foreclose without court oversight, making it easier for unscrupulous practices to spread.

Last year, California led the nation with about 547,000 foreclosure filings, while Nevada led the country with 9 percent of its total housing units receiving foreclosure notices. The situation isn't getting much better. In October, Nevada and California ranked first and second in the proportion of homes entering the foreclosure process. About 2 million California homeowners are in "underwater" mortgages, owing more on their homes than they are worth.

Harris concluded that the national settlement in the works wasn't a good enough deal for Californians. The total amount, widely reported as $20 billion, wouldn't mean a sufficient share for the state when divided up among thousands and thousands of aggrieved homeowners. And, she warned, banks would get a pass on unlawful acts that haven't been discovered yet.

Her decision was a calculated risk. The alliance with Nevada makes it more likely that it will pay off.