(Reuters) ? The Massachusetts attorney general has filed a lawsuit against five large U.S. banks accusing them of deceptive foreclosure practices, a signal of ebbing confidence that a multi-state agreement can be worked out.
Attorney General Martha Coakley said on Thursday the lawsuit was filed in state court in Boston against Bank of America Corp, JPMorgan Chase & Co Inc, Citigroup Inc, Wells Fargo & Co and GMAC.
It also names the banks' private mortgage registry, MERS, as a defendant.
"Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law," Coakley said in a statement. "Our action today seeks real accountability for the banks illegal behavior and real relief for homeowners."
The complaint accuses them of using fraudulent documents when processing foreclosures; of foreclosing on properties without holding the actual mortgage; of corrupting the state's land recording system; and of failing to uphold promises to modify loans for the state's homeowners.
In October, Coakley said she was preparing to sue over unlawful foreclosures because she had lost confidence the banks would be able to bring an acceptable multi-state settlement to the negotiation table.
On Thursday, a statement from Coakley's office repeated she "had made clear" she would not sign an agreement that included "broad liability release regarding MERS and other issues."
The state's lawsuit, which was filed in Suffolk Superior Court in Boston, comes after more than a year of negotiations with the banks and state and federal officials.
The immediate impact of the suit on the broader negotiations is unclear.
The attorney general in Iowa, Tom Miller, who is leading the negotiations for the states, said in a statement they hope to reach a settlement "soon."
Coakley had indicated she is open to joining the settlement, Miller said.
"We're optimistic that we'll settle on terms that will be in the interests of Massachusetts," Miller said.
Chase said in a statement that it is disappointed Massachusetts filed the suits when negotiations are ongoing on a broader settlement that it said could bring immediate relief to borrowers.
GMAC said it was unhappy that Massachusetts "elected not to continue a more constructive path that could help borrowers in the state, but rather has chosen to use the court process."
Representatives for Bank of America, Citigroup and Wells Fargo did not immediately respond to requests for comment.
Coakley, who took office in 2007, has been aggressive in moving against Wall Street firms and U.S. banks. Her office said it has secured more than $560 million in relief for investors and borrowers, while keeping more than 24,000 people in their homes.
In 2010, Coakley called on Bank of America and other banks to cease foreclosures amid allegations of mortgage servicing fraud and robo-signing.
The mortgage servicing units of the five banks are accused of taking shortcuts as a way to deal with a deluge of foreclosures in the wake of the 2008 credit crisis.
A settlement with all 50 states and federal authorities could help the banks move beyond the legal fallout that has dogged them since the peak of the financial crisis.
(Reporting by Tim McLaughlin in Boston; editing by John Wallace and Andre Grenon)
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