Colin Barr

Following the money in banking, economics, and Washington

Alabama ends foreclosure holdout

October 13, 2010: 12:52 PM ET

If you can't ignore 'em, join 'em.

That appears to describe Alabama attorney general Troy King's take on the push by his national peers to hold banks accountable for botched foreclosures and mishandled legal documents.

The King has arrived

King's office said Wednesday afternoon it would join the attorneys general in 49 other states and press for investigations of possible wrongdoing by employees of giant lenders and mortgage servicers including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and taxpayer-funded Ally Bank.

The investigation is emerging as a major headache for the banks, with JPMorgan on Wednesday adding $1.3 billion to its legal reserves and CEO Jamie Dimon admitting the bank could end up paying penalties to settle the AG probes.

Alabama's shift is noteworthy because the National Association of Attorneys General earlier put out a statement announcing a national effort to pursue any mortgage-processing wrongdoing by the banks.

The attorneys general pointed to evidence that banks had foreclosure affidavits signed by people who hadn't reviewed the actual loan files, and had affidavits signed outside the presence of notaries. Both are contrary to state law, the attorneys general said.

"Through this process, the states will attempt to speak with one voice to the greatest extent possible," the group, headed by North Carolina attorney general Roy Cooper, said. "At the end of this statement is a list of the participating states."

There were, it turns out, 49 states – all but Alabama. So why wasn't King on board?

His office wouldn't say, but it later released a press statement that suggests he remains unconvinced that any laws have been broken.

To be clear, no violations of Alabama law have been alleged at this time.  That said, we are troubled to see that mortgage lenders around the country were violating the procedures of our sister States.  Accordingly, we are joining the national investigation (all 50 States) to ensure that the lenders' wrongdoings did not extend beyond what is already known to encompass actions that violated Alabama law and thus adversely affected Alabama citizens.  If the investigation does not uncover any wrongdoing under Alabama law, then the lenders have nothing to fear from us.  If the investigation does uncover wrongdoing in Alabama, we stand ready to take the appropriate action.

That's not exactly inspiring, but it's better late than never.

Join the Conversation
About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

Email Colin
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.