California and Nevada, the two states hardest hit by the foreclosure crisis, are teaming up to jointly investigate mortgage industry misconduct and fraud that has harmed struggling homeowners.

The collaboration -- which will target the home loan process from origination to the selling of the loans as securities to investors -- was announced Tuesday in Los Angeles by Attorneys General Kamala Harris of California and Catherine Cortez Masto of Nevada.

More than 650,000 homeowners in the two states lost homes to foreclosure last year, and more are failing to secure favorable loan terms through various programs designed to help them, Harris and Masto said.

"What we know is that these homeowners want accountability and they want consequences, and they deserve to have both," Harris said. The two states are "expanding and accelerating our investigations in ways we can maximize relief that can be brought to homeowners" who are in foreclosure or are trying to modify their loans, Harris added.

The new Mortgage Investigation Alliance between the two states will link their civil and criminal enforcement teams in sharing intelligence, witnesses, reports, litigation strategy and subpoenas, Harris said.

In Nevada, one out of every 180 housing units has gone through foreclosure, Harris noted, and in California, one out of every 243 housing units has been foreclosed. California led the nation last year in the number of foreclosures, with a total of 546,669 foreclosure filings, or 4 percent of the state's housing units, Harris said. Nevada had 9.4 percent of its homes foreclosed, a total of 106,160 units in the same period, according to the attorney general's office.


"These two states experienced an incredible amount of growth during the boom, and after the boom, we experienced an incredible amount of loss," Harris said.

Masto said that "the size and scope and complexity" of the investigations makes a joint effort necessary.
For example, she said her office announced the indictment last month of two people "who led a massive robo-signing scheme which led to filing of tens of thousands fraudulent documents" in Nevada foreclosures. The two accused of running the scheme led the plot from California, she said. The pair directed employees to forge names on foreclosure documents and then notarize them.

Both states are "nonjudicial" foreclosure states, meaning that lenders don't have to go through court proceedings to foreclose on a home. That means a foreclosure can take place in a much shorter period of time.

Desperate homeowners, facing imminent loss of their homes, are easy prey for scammers who offer to solve their problems for a fee and then do nothing, Harris and Masto said.

Also, the foreclosure crisis has left many homes vandalized and neighborhoods in decay, Masto said. Her office has prosecuted scammers who advertise homes for rent that they have no claim on and then collect deposits from unsuspecting victims.

The Nevada Attorney General's Office has gone after robo-signing and mortgage fraud and is suing the Bank of America and its subsidiaries, including Countrywide, over violations of an agreement covering mortgage loans and loan servicing. It also has investigated foreclosure rescue scams, Masto said, in which "the homeowner desperately looks for a lifeline and unfortunately often becomes victim of a potential mortgage scam."

Harris's office has almost 40 investigators working on mortgage fraud and has subpoenaed documents from the government-backed companies Fannie Mae and Freddie Mac and launched other investigations of big lenders. Her office has also gone after foreclosure rescue businesses, including a Southern California law firm and a Stockton real estate company. She is also supporting legislative reforms of the loan servicing process.

"This finally must be about pursuit of lasting reform, so that what has happened will never happen again," Harris said.

Harris left negotiations on a multistate agreement with five large banks two months ago, saying the proposed agreement didn't do enough for Californians.