Connecticut's attorney general on Friday called on state courts to freeze home foreclosures for 60 days after borrowers claimed that major lenders may be making misstatements in the foreclosure process.
The attorney general, Richard Blumenthal, also said he is investigating JPMorgan Chase & Co over its foreclosure practices. He previously said he was investigating Ally Financial Inc and its GMAC Mortgage unit.
Banks that lured consumers into loans they couldn't afford now seek to stampede them into foreclosure, Blumenthal said in a statement. This freeze should stop a foreclosure steamroller based on defective documents and enable effective remedies.
On Wednesday, JPMorgan said it was temporarily suspending foreclosure proceedings, while Ally last month said its GMAC Mortgage unit was halting evictions and post-foreclosure proceedings in 23 U.S. states.
The decisions came after borrowers' lawyers released affidavits suggesting that some lenders' employees are submitting documentation in foreclosure proceedings without understanding the contents.
This has raised concern that thousands of borrowers are being foreclosed upon without good reason.
Investigators in at least six states are examining foreclosure practices at GMAC, JPMorgan or both, and calling for such practices to be defended or halted.
Blumenthal, a Democrat, is running for the U.S. Senate.
(Reporting by Jonathan Stempel in New York; editing by John Wallace)