Top legal officers of all 50 states opened a joint investigation into home foreclosures, saying they will seek an immediate halt to any improper practices at banks and mortgage companies.

The states will conduct a coordinated inquiry into whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The group intends to establish independent monitoring, Iowa Attorney General Tom Miller, who is leading the probe, said today in a statement.

“The financial institutions would be well served by working with us to get it cleaned up,” Ohio Attorney General Richard Cordray told Bloomberg Television’s “InBusiness with Margaret Brennan.” “And they’d also be well served to think about reaching negotiated resolutions with borrowers in cases where they’ve created exposure for themselves by committing fraud upon the courts.”

The National Association of Attorneys General announced today that 49 states would be participating in the investigation, with Alabama the holdout. Alabama later joined the probe, even though “no violations of Alabama law have been alleged at this time,” Attorney General Troy King said in an e-mailed statement.

Alabama is taking part “to ensure that the lenders’ wrongdoings did not extend beyond what is already known to encompass actions that violated Alabama law,” King said.

Officials in at least 10 states including Florida and Ohio previously announced separate probes into questionable foreclosure tactics.

States including California and Colorado asked lenders to stop foreclosures. Ohio’s Cordray last week sued Ally Financial Inc., claiming fraud in foreclosure practices.

Bank of America Corp., the largest U.S. lender, extended a freeze on foreclosures to all 50 states on Oct. 8 as concern spread among federal and state officials that homes were being seized based on faulty data.

JPMorgan Chase & Co. and Ally’s GMAC Mortgage unit stopped repossession cases in 23 states where courts supervise home seizures. Litton Loan Servicing LP, a mortgage-servicing business owned by Goldman Sachs Group Inc., said Oct. 8 that it was halting some foreclosures to review how they are handled.

“We look forward to cooperating with the attorneys general,” Tom Kelly, a spokesman for New York-based JPMorgan Chase, said today in a phone interview.

“We will meet with the attorneys general to discuss the concerns they have expressed,” Rick Simon, a spokesman for Charlotte, North Carolina-based Bank of America, said. “On Friday Bank of America announced we will stop foreclosure sales across all 50 states while we complete our review. We believe this demonstrates appropriate concern and a responsible approach.”

Gina Proia, a spokeswoman for Ally, said “GMAC Mortgage is committed to restoring confidence in the foreclosure process and has been working expeditiously on the review and remediation activities for the affected cases.”

“Where we have received official inquiries from individual states, we are responding accordingly,” Proia said in an e-mailed statement.

As part of its probe, the group established an executive committee of top legal officers from 12 states, including California, Iowa, New York, Illinois and Texas, and the banking regulators of Maryland, New York and Pennsylvania.

“This announcement illustrates states’ ability to coordinate our efforts to protect consumers,” John Ryan, executive vice president of the Conference of State Bank Supervisors, said in a statement.

Since this issue affects people’s homes and has clear economic implications, this probe and its outcome need to be fair both to homeowners and also to lenders,” Iowa’s Miller said in his statement.

The group’s initial goals include stopping improper foreclosures, reviewing past and present practices by mortgage servicers, evaluating potential remedies and establishing a mechanism for more effective independent monitoring of future mortgage foreclosure practices, Miller’s office said.

“We are in the fourth year of a housing and economic crisis that was brought on by lax practices of the mortgage lending industry,” Minnesota Attorney General Lori Swanson said in a statement. “The latest allegations of corner cutting and slipshod paperwork are troubling, but perhaps not surprising, and they need to be addressed to ensure a fair and accurate foreclosure process in Minnesota.”

Some lenders have acknowledged that employees may have completed court affidavits without confirming their accuracy. In December, a GMAC employee said in a deposition in a foreclosure case in West Palm Beach, Florida, that his team of 13 people signed about 10,000 documents a month without verifying them.

Ohio’s Cordray announced last week that he sued Ally in state court, claiming the GMAC unit committed fraud and violated state consumer law by filing false affidavits in foreclosure proceedings.

“It appears affidavits and other documents have been signed by persons who did not have personal knowledge of the facts asserted in the documents,” the Mortgage Foreclosure Multistate Group said in its statement. “In addition, it appears that many affidavits were signed outside of the presence of a notary public, contrary to state law.”

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(Source: Bloomberg News)