Building Stronger & Safer Communities

Attorneys General
Take Action:
Real Leadership in
Fighting Foreclosures
ACORN Survey and Scorecard
June 2008

ACORN Financial Justice Center • Austin King, Director

2609 Canal Street • Suite 500 • New Orleans, Louisiana 70119
www.acorn.org • Phone: (504) 267-3750 • Fax: (504) 267-3751
 Building Stronger & Safer Communities

EXECUTIVE SUMMARY _____________________________________________________________________________

Many state attorneys general are leading the fight to protect homeowners from joining the flood of Americans
losing their homes to foreclosure. Record national delinquency rates are being driven by resetting rates on
adjustable rate mortgages, negative amortization loans like payment option ARMs, widespread mortgage
fraud, and lending without regard to the borrower’s ability to pay. These delinquency rates, combined
with inadequate loss mitigation activity from mortgage servicers and an illiquid market, have produced the
record-setting levels of foreclosure in virtually every corner of the country. The most aggressive attorneys
general advocating for homeowners in this crisis are using every tool at their disposal, from cutting-edge
legal strategies in curtailing predatory lending and equity theft, to advocacy for structural and regulatory
improvements, to high-end constituent service that informs homeowners of their options and helps them
navigate the system to save their homes. This report, the first effort of its kind, seeks to collect stories of the
work that all 51 attorneys general have done, highlight and recommend the best practices and cutting-edge
strategies they have employed, and compare their efforts and willingness to engage in solving this crisis and
preventing the next one with those of their colleagues around the nation.

All told, there were six attorneys general who particularly stood out for their aggressive and creative
leadership in solving this crisis: Connecticut Attorney General Richard Blumenthal, Massachusetts Attorney
General Martha Coakley, New York Attorney General Andrew Cuomo, Illinois Attorney General Lisa Madigan,
Iowa Attorney General Tom Miller, and Minnesota Attorney General Lori Swanson, who all earned an
“A+” grade. These attorneys general are actively seeking real data from mortgage servicing companies,
pursuing cutting-edge cases against the industry’s bad actors, speaking out on matters of state and federal
importance, putting their offices to work for distressed borrowers, cracking down on vulturine rescue
scams, and pushing the industry to perform better for their constituents.

Many other attorneys general are doing great work and are paying increasing attention to the crisis, devoting
additional resources to the issue, and collaborating together more often than in the past. Still other attorneys
general, either because of their state avoiding the worst of the crisis so far or ideological barriers, have not
yet tuned in and turned the attention of their offices to meeting the challenges faced. ACORN is pleased to
see so much progress, and looks forward to working with attorneys general in continuing to pursue justice
and protect the American dream of homeownership.

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INTRODUCTION _____________________________________________________________________________________
American families are being squeezed on all sides – at the gas pump, the grocery store, through healthcare
costs, and especially in housing costs, long the most substantial piece of the American household’s budget.
With resetting interest rates, negatively amortizing loans, plummeting home values, and an illiquid market
that severely restricts refinancing availability, the national mortgage delinquency rate has topped 6% of all
loans, and 30% of subprime loans. More Americans lost their homes to foreclosure in 2007 than at any
time in recent history, and the crisis is only expected to deepen in 2008 and 2009. Currently, 2.5% of all
mortgages are in foreclosure, according to the Mortgage Bankers Association. One in 10 borrowers is
underwater, owing more money to their lender than their home is worth, and increasingly homeowners are
walking away from their homes and sending their keys to their lender in the mail, giving rise to the post-
subprime phenomenon of “Jingle Mail.”
There is an unlimited supply of blame to go around for the genesis of this crisis, from regulators who were
asleep at the switch, predatory brokers that swindled borrowers into bad loans in exchange for higher
commissions, lenders who abandoned any semblance of underwriting standards, insurance and ratings
agencies that did no due diligence, investors seeking to game the system, and a federal government that
approached the crisis with the fortitude of an ostrich. These failures were then compounded by the nearly
universal inadequacy of mortgage servicing companies to handle the sheer volume of delinquent mortgages,
and some saber-rattling from moneyed investors that slowed down appropriate loss mitigation and other
foreclosure avoidance workouts.

While Congress and some governors have grabbed headlines for some of their modest reactions to the
foreclosure crisis, there is another critical and largely untold story of the innovative and impactful leadership
that many states’ attorneys general have demonstrated in their diverse responses to the crises in their states.
This report, the first effort of its kind, seeks to catalogue the work that all 51 attorneys general have done,
highlight and recommend the best practices and cutting-edge strategies they have employed, and compare
their efforts and willingness to engage in solving this crisis and preventing the next one with those of their
colleagues around the nation.
ACORN appreciates the willingness of the vast majority of the state attorneys general and their staffs to
engage with us on this project and tackle the issue. The reactions that attorneys general have had to the
current crisis range from total inaction to all-out efforts using the full complement of available resources to
protect borrowers and reform the current system to prevent another crisis in the future. A questionnaire
from ACORN distributed to all 51 offices focused on nine issue areas in which some attorneys general have
acted to protect borrowers and enact reforms, from simple constituent service like establishing a 1-800 line
for distressed borrowers, to legal strategies like seeking preliminary injunctions against foreclosures sought
by companies that engaged in widespread predatory lending and advocacy roles like using the bully pulpit to
advance legislative protections at the state and federal level. The questionnaire further sought a summary
of any and all actions that the office had taken outside of the scope of the nine questions, which resulted in
a few inches-thick binders of information from some of the field’s leaders.
The coming pages include the 51-state scorecard, a discussion of findings including highlights of some best
practices from the front lines, a fuller explanation of methodology, and an appendix with the full questions.

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 s
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Se Le Fe Pip Ad Fe To Pr Ad EX
State Attorney General Party 1 2 3 4 5 6 7 8 9 10 Total Grade
Alabama Troy King R 0 0 0 0 0 0 0 0 0 0 0 F
Alaska Talis Colberg R 0 0 0 0 0 0 0 0 0 2 2 F
Arizona Terry Goddard D 2 2 1 2 2 1 2 1 2 6 21 A
Arkansas Dustin McDaniel D 2 2 1 2 1 2 2 1 2 5 20 A-
California Jerry Brown D 2 2 1 2 2 1 2 1 2 6 22 A
Colorado John Suthers R 2 0 0 2 2 0 0 1 1 2 10 C-
Connecticut Richard Blumenthal D 2 2 2 2 2 2 2 2 2 7 25 A+
Delaware Beau Biden D – – – – – – – – – – – Inc.
Florida Bill McCollum R – – 0 2 2 0 2 – 2 3 15* B-
Georgia Thurbert Baker D 2 1 2 2 2 2 2 2 2 5 20 A
Hawaii Mark Bennett R 0 0 0 0 0 0 0 0 0 2 2 F
Idaho Lawrence Wasden R 1 2 0 0 0 0 1 0 2 5 11 C
Illinois Lisa Madigan D 2 2 2 2 2 2 2 2 2 7 25 A+
Indiana Steve Carter R 2 1 1 2 0 1 2 2 1 4 16 B
Iowa Tom Miller D 2 2 2 2 2 2 2 2 2 7 25 A+
Kansas Stephen Six D – – – – – – – – – – – Inc.
Kentucky Jack Conway D 1 2 1 2 2 1 2 2 2 5 20 A-
Louisiana Buddy Caldwell D 0 0 0 0 0 0 0 0 0 0 0 F
Maine Steven Rowe D 0 0 0 0 0 0 0 0 0 2 2 F
Maryland Doug Gansler D 2 2 2 2 2 2 2 2 2 4 22 A
Massachusetts Martha Coakley D 2 2 2 2 2 2 2 2 2 7 25 A+
Michigan Mike Cox R 2 1 0 0 0 0 2 1 0 4 10 C-
Minnesota Lori Swanson D 2 2 2 2 2 2 2 2 2 7 25 A+
Mississippi Jim Hood D 2 2 2 2 2 2 2 2 2 3 21 A
Missouri Jay Nixon D 2 2 0 2 2 0 2 2 2 4 18 B
Montana Mike McGrath D 0 0 0 0 0 0 0 0 0 2 2 F
Nebraska Jon Bruning R 0 0 0 0 0 0 0 0 0 0 0 F
Nevada Catherine Cortez Masto D 1 1 0 1 0 0 2 2 2 3 12 C
New Hampshire Kelly Ayotte R – – – – – – – – – – – Inc.
New Jersey Anne Milgram D 2 1 0 2 1 0 2 0 2 5 15 B-
New Mexico Gary King D 1 2 2 2 2 2 2 2 2 5 22 A
New York Andrew Cuomo D 2 2 2 2 2 2 2 2 2 7 25 A+
North Carolina Roy Cooper D 2 2 1 2 2 2 2 0 2 6 21 A
North Dakota Wayne Stenehjem R 0 0 0 0 0 0 0 0 0 0 0 F
Ohio Vacant/Interim – – – – – – – – – – – Inc.
Oklahoma Drew Edmondson D – – – – – – – – – – – Inc.
Oregon Hardy Myers D 2 2 2 2 2 2 2 1 2 5 22 A
Pennsylvania Tom Corbett R 0 2 0 0 0 0 0 0 0 2 4 F
Rhode Island Patrick Lynch D 0 0 0 2 0 0 2 0 2 4 10 C-
South Carolina Henry McMaster R 0 0 0 0 0 0 0 0 0 2 2 F
South Dakota Larry Long R 0 0 0 0 0 0 0 0 0 2 2 F
Tennessee Robert Cooper D 2 2 0 2 2 0 2 0 2 4 16 B
Texas Greg Abbott R 2 1 0 2 1 0 2 2 1 3 14 C+
Utah Mark Shurtleff R 2 2 1 2 2 1 2 2 2 5 21 A
Vermont William Sorrell D 0 0 0 0 0 0 0 0 0 2 2 F
Virginia Bob McDonnell R 1 0 0 1 0 0 0 0 2 1 5 D
Washington Rob McKenna R 2 2 1 2 2 1 2 2 2 4 20 A-
Washington, DC Linda Singer D 0 1 0 0 0 0 1 0 1 5 11 C
West Virginia Darrell McGraw D 2 2 1 2 2 1 2 1 1 1 15 B-
Wisconsin J.B. Van Hollen R 2 1 0 1 1 0 1 1 1 2 10 C-
Wyoming Bruce Salzburg D – – – – – – – – – – – Inc.

SCORING KEY: Partial Credit - 1 point Full Credit - 2 points Extra Credit - 0 to 7 points (See Methodology section for full explanation)
Notes: Florida score based on proportion to score quantities. See Methodology section for full explanation.
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Distribution of foreclosure grades from ACORN scorecard

This chart shows the distribution of grades from the ACORN scorecard. As evident, more than a third of of
those offices that received a grade were in the “A” range, with well more than two-thirds of offices receiving
passing grades. While Democrats tended to fare better in regards to their work on foreclosures, a number of
Republicans stood out by earning “A”s and “B”s, and a number of Democrats received “F”s.

20
Total 18
Democrat

16 Republican
15

Total 12
10

Total 8 8
Total 6
5 5

4 Total 1 4
3
2 2
0 1

Grade A B C D F
Note: Chart does not include the six offices that received an “Incomplete” grade.

Distribution of grades based on state’s level of foreclosure activity

This chart shows how each quintile of states scored when grouped by level of foreclosure activity. As evident,
states with high rates of foreclosures tended to have attorneys general much more engaged in the issue than
those states that have mostly escaped the foreclosure crisis. ACORN predicts that as the crisis continues
to spread and affect more states, more and more attorneys general and their offices will train their fire on
foreclosures and improve on this measure. Rates of foreclosure provided bywww. realtytrac.com

GRADE A B C D F

Top ten foreclosure rates 5 1 3 0 0

Next 10 states 3 4 2 1 0
Middle 10 states 5 0 2 0 1
Next 10 states 3 0 0 0 5
Bottom ten foreclosure rates 2 1 1 0 6

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FINDINGS ______________________________________________________________________________________________
While the responses of attorneys general to the current foreclosure crisis range widely, it is clear that the
interest and attention paid to the topic has grown rapidly in the recent past, and that the best practices of
some attorneys general are increasingly being replicated. The vast majority of attorneys general are aware
of the crisis and engaged in some sort of response, though too few have been willing to stake out aggressive
leadership and advocacy roles. This report’s findings on the questionnaire’s topics and responses are
organized into four categories below: interstate cooperation and mortgage servicing data, constituent
services, advocacy roles, and legal strategies. Within all of these arenas, there are attorneys general doing
stellar work, and many opportunities to continue to grow and evolve new strategies for solving different
parts of the current crisis.

INTERSTATE COOPERATION AND MORTGAGE SERVICING DATA

It is clear that there is an accelerating amount of interstate cooperation
and coordination, which will be required to protect homeowners and lead
the way out of the crisis. That certain attorneys general have taken little
interest or action in addressing the foreclosure crisis is in some cases
attributable to their state and constituency largely escaping the worst
of it (for now), and in other cases seems to stem from an ideological
predisposition toward a laissez fair approach to the financial institutions
and major companies involved.

Among the most commendable multi-state efforts currently underway is

the bipartisan State Foreclosure Prevention Working Group, which, though Tom Miller
it has benefited from the collaboration and efforts of many, is particularly A+ Iowa
indebted to the leadership of Iowa Attorney General Tom Miller. The
attorneys general from Arizona, California, Colorado, Iowa, Illinois, Leading force behind State
Massachusetts, Michigan, New York, North Carolina, Ohio, and Texas Foreclosure Prevention
Working Group
fill out the Working Group, along with the New York and North Carolina
banking regulators and the Conference of State Bank Supervisors. Early endorser of Dodd’s
Homeownership and Equity
The Working Group has focused particular attention on the inadequate
Protection Act
loss mitigation of mortgage servicers, and has undertaken great efforts
to acquire and process data from the servicers related to their home Has participated in
retention practices. Because mortgage servicers are largely unregulated numerous public events and
and unlicensed, there had been, previous to the Working Group’s efforts, town halls
no centralized reservoir of data related to servicers’ activity, other than Authored legislation to
foreclosure filings, which are public record. The Working Group endeavored improve Iowa’s borrower
to create just such a data reservoir, and achieved fairly broad voluntary protections
participation from servicers, although there were a variety of roadblocks
including concern about federal regulatory agencies’ “claiming the field” Leader in effort to protect
and discouraging servicers from participating. state foreclosure laws from
federal preemption

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The Working Group has released two reports that show with data what housing counselors have known
anecdotally for some time, in particular that the servicers’ loss mitigation efforts are woefully inadequate,
with seven out of ten distressed borrowers that should be on a loss mitigation track not receiving the
assistance they need. These cases represent the “low-hanging fruit” of foreclosure prevention, in that routine
modifications would allow the borrowers to save their homes and simultaneously reduce the loss in profits
to the investors who own the loans, as foreclosures usually result in a significant profit loss, especially in
a weak market. Without a clear picture of what the mortgage servicers are doing with loss mitigation, it is
difficult to diagnose the weak links in their systems and start making desperately needed improvements, be
they voluntary or imposed by new regulations.

The Hope Now Alliance, the organization founded by the industry last year in response to the crisis, has
trumpeted what it considers to be the success of the servicing industry in avoiding foreclosures, claiming
in April, for example, to have provided “more than one million workouts” to prevent foreclosure. This is a
rather incomplete picture though, as only 278,000 of those workouts actually involved a modification to the
terms of the loan that had already become delinquent, and it is unknown how many of those modifications
were merely capitalizing arrears instead of actually reducing the interest rate or principal to arrive at a more
affordable monthly payment. The balance was mostly repayment plans, which actually increase the monthly
payment of the distressed borrower by tacking on a portion of the arrears to the already unaffordable terms,
and are not particularly likely to avoid foreclosure in the end.

The Working Group’s efforts at getting real data on loss mitigation activities are critical to providing public
accountability to improve servicing practices. Question One of the survey asked about willingness to work
with other Attorneys General in getting just such data, and to make it as useful as possible by differentiating
it by company and making it publicly available. There was broad support for continuing and expanding the
role of the Working Group in this essential service they have provided.

CONSTITUENT SERVICES
Attorney general’s office can play an important role in the direct services that they provide to constituents,
even though they may have budgets of varying sizes. These services can take many different forms, and
aside from being smart politics, can actually succeed at reducing unnecessary foreclosures.

Among the simplest services employed by some attorneys general is the creation of 1-800 numbers for
distressed borrowers, as a centralized source of information for those seeking advice and assistance. Many
offices also publish brochures or use their websites as a means for distributing information. Question
Four asked the attorneys general about whether they have an information portal like a 1-800 number or
published material on their website, and many offices have created portals for distressed borrowers, often
in conjunction with their governor or state banking department. Some states, especially smaller states with
smaller budgets, indicated that they lacked the staffing to provide direct assistance and relied instead on the
Hope Now hotline to refer borrowers.

Another constituent service many offices provide is to arrange large-scale town hall meetings or forums,
whose purpose can range from the purely informational to the incredibly practical, by including lenders,
servicers, and housing counselors and actually getting some workouts done on the spot. Question Seven

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asked the attorneys general about their willingness to hold large meetings like these in collaboration with
community organizations. As with the 1-800 number, this is an easy way to inform the public, and attorneys
general demonstrated widespread willingness to do more public events to inform struggling borrowers
about their options and encourage them to avoid “foreclosure consultant” scam artists that have been
preying on desperate homeowners.
A natural byproduct of having an attorney general’s office interact with so
many individual constituents in need of help is figuring out systematic ways
to provide that help. The state of Massachusetts, in a show of interagency
cooperation, has achieved nearly universal participation from servicers to
voluntarily suspend foreclosure proceedings against any borrower that
enters the state’s distressed borrower pipeline for sixty days. This provides
ample time to collect the necessary financial documents that should inform
any loss mitigation decisions, and word of the servicers’ participation helped
encourage borrowers who had previously been out of contact with their
servicer get back in touch through the state. Even the Hope Now Alliance has
announced that most major lenders will provide a 30-day stay for previously
no-contact borrowers that are facing foreclosure and make contact.
Richard Blumenthal
Question Five asked about the willingness of attorneys general to advocate A+ Connecticut
on behalf of individual borrowers to win a reprieve and some breathing room
to hopefully negotiate a mutually agreeable solution to avoid foreclosure. Proposed and fought
There was, generally, less enthusiasm expressed from attorneys general for predatory lending
about providing this level of hands-on service, mostly due to budgetary legislation in Connecticut
restraint, although more than 20 offices indicated their willingness to go to Established a task force
bat for individual borrowers with their servicers. ACORN recommends that on predatory lending and
those offices facing staff or budget shortfalls specifically request funding foreclosure assistance
from the governor and legislature to carry out a program of borrower
assistance. Contributed $10,000 to
help train more than 150
There are many other additional constituent services that the most active attorneys for pro bono work
attorneys general have provided, including a novel approach from Connecticut
Advocated for individual
Attorney Richard Blumenthal, who has trained more than 150 lawyers to provide
borrowers to win stays on
pro bono legal defense for families facing foreclosure. foreclosures

ADVOCACY ROLES Brought suit against

fraudulent appraisers
As the top legal officers in their states, attorneys general have a unique and
important role to play in using the bully pulpit of their office to speak out Worked on educating
in support of changes at the state and federal level that will help end the consumers about mortgage
current foreclosure crisis and prevent it from returning in the future. Many scams
attorneys general have taken full advantage of the platform their offices Outspoken advocate
afford them to advocate for responsible lending and foreclosure prevention for federal bills to help
solutions, while others have avoided public pronouncements on areas borrowers

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outside of a narrowly conceived role.

Attorneys general need to support strong federal and state regulation

of lenders. The federal government, from the executive branch to the
Congress, and certainly including the patchwork quilt of regulatory
agencies, did far too little in the years that led to the current crisis,
and has been slow to react as well. One necessary step forward is the
Homeownership Preservation and Protection Act, (S. 2452), authored by
Senator Chris Dodd, which would rein in the most abusive and predatory
practices of mortgage lenders and brokers, establish new safeguards for
borrowers, and put some teeth into existing regulations. Importantly,
the bill would allow attorneys general to enforce its provisions, without
preempting existing state laws. Question Three asked attorneys general Lisa Madigan
to endorse the Homeownership Preservation and Protection Act, and A+ Illinois
disappointingly, only about a dozen attorneys general were willing to give
the Act a full-throated endorsement, even as many others acknowledged Member of the State
the importance of new federal predatory lending laws. Foreclosure Prevention
Working Group
Another important change in federal law would allow an estimated 600,000
Instigated investigations
borrowers to avoid foreclosure. Currently, federal bankruptcy judges are
into two largest lenders’
allowed to modify the terms on major debts like RVs, yachts, and second
practices
homes, but are unable to do so for principal residences due to a specific
loophole in federal bankruptcy law. The Emergency Home Ownership An outspoken advocate for
and Equity Protection Act (HR 3609), would close this loophole and allow federal legislative changes
bankruptcy judges to alter the terms on the mortgages of principal residences Created mortgage referral
to save homes. In its original form at the time of the questionnaire, the helpline and lending guide
Foreclosure Prevention Act (S. 2636) in the Senate included the bankruptcy
changes, but was stripped out before the Foreclosure Prevention Act Led the fight for the
achieved final passage. Question Six asked attorneys general to endorse Illinois Homeownership
the Foreclosure Prevention Act, and saw similarly disappointing hesitancy Preservation Act
to engage on federal issues outside of their immediate purview. Brought suit against
mortgage brokers and
One positive sign in terms of federal advocacy is that attorneys general
rescue scam artists
will step up to defend state prerogatives when the federal government’s
penchant for preemption goes overboard. During the debate of the FHA
package in the House of Representatives, Congress members Brad Miller of North Carolina and Steven
LaTourette of Ohio offered an amendment to clarify that the federal government had never had a role in the
foreclosure process and that the underlying bill was not to be used as a pretext for federal preemption of
state foreclosure regulations. A total of 40 attorneys general endorsed the Miller-LaTourette amendments,
and helped secure its passage by a wide, bipartisan margin, despite fierce opposition from industry
lobbyists.
Attorneys general were generally more open and willing to push for changes to state law than to push
the federal government, and many have even led legislative efforts to protect borrowers and reduce

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foreclosures, from drafting bills to testifying at committees and speaking

at rallies. Question Nine asked attorneys general to work with their state
legislatures and governors to ban predatory lending practices and reform
the foreclosure process to encourage home retention activities. The vast
majority of attorneys general indicated a willingness and enthusiasm to
do so, even if they don’t all agree on the precise policy prescriptions to
accomplish the goal. Many states have in the last year debated bills in
response to the crisis, from full predatory lending bills to simple bills
addressing the foreclosure consultant and rescue fraud operations, and it
is heartening that attorneys general played large roles in securing passage
of so many of those new consumer protections.
One final advocacy arena deals not with legislative changes, but with directly Lori Swanson
calling on servicers to improve their performance in preventing foreclosures. A+ Minnesota
The State Foreclosure Prevention Working Group has done an incredible
Before taking office created
service in laying the groundwork for measuring industry improvement,
AG’s Predatory Lending
but as their most recent report showed most borrowers are not seeing a
Study Group
real difference despite all the glitzy efforts and pronouncements. Because
the mortgage servicing industry has no regulator or uniform standards, Led fight with ACORN for
efforts at gaining industry-wide improvements have been frustrating. A nation’s toughest predatory
2007 Homeownership Summit produced a “Statement of Principles” for lending law
mortgage servicing that was endorsed by community groups, industry Called on Federal Reserve
groups, members of Congress, and attorneys general alike, but was clearly to crack down on predatory
a voluntary guideline, like the Bush/Paulson initiative, and has had no lending
discernible impact on foreclosure reduction.
Frequent testifier before
In February, 2008, ACORN announced that it had won major concessions Congress on protecting
from the nation’s largest subprime servicer, Countrywide, which set a new homeowners
bar for best practices by agreeing to reduce emphasis on repayment plans,
Pursued many cases against
increase modifications, and do so with a clear standard of affordability to
predatory lenders and
make sure the foreclosure avoidance strategy would succeed. ACORN
equity strippers
and other community organizations have attempted to push other major
servicers into “best practices” agreements that will improve their foreclosure Led public education efforts
prevention activities and provide real affordability standards by which to about foreclosure avoidance
modify mortgages. Question Eight asked attorneys general about their and rescue scams
willingness to join community organizations in pushing mortgage servicers
Joined ACORN in pushing the
to adopt such “best practices” agreements in an effort to reduce unnecessary MN Foreclosure Deferment
foreclosures. Many attorneys general expressed a willingness to do so as a Act “The Minnesota Attorney
natural outgrowth of the work of the State Foreclosure Prevention Working General’s Office has a strong
Group, but unfortunately a number of attorneys general said that cajoling a history of working with
company into changing its behavior when that behavior is not illegal would ACORN to fight predatory
be an overreaching of their authority and said they were only interested lending and prevent
in pursuing illegal behavior. In the vacuum of oversight and regulation foreclosure.” - Letter from
that exists, aggressive leadership from attorneys general will be critical to AG Swanson to ACORN.

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efforts to improve the industry and save homes from unnecessary foreclosure.

LEGAL STRATEGIES
Obviously, the most important arrow in an attorney general’s quiver is the legal authority to represent the
state in pursuing justice. Though there are significant disparities between the states in terms of existing
predatory lending and foreclosure laws to form a basis for legal actions, most attorneys general do have a
sound basis for pursuing legal strategies to protect homeowners and stop foreclosures and equity theft.
Perhaps the best example of an aggressive legal strategy comes from Massachusetts Attorney General Martha
Coakley, who sought and won a preliminary injunction against all foreclosure filings on “presumptively
unfair” loans made by Fremont Investment and Loan. The order, issued by Judge Ralph D. Gants, prohibits
Fremont from advancing or beginning foreclosure proceedings on any loan that is “presumptively unfair.”
Under the order, a loan is considered presumptively unfair if it:

• is an adjustable rate mortgage with an teaser period of three

years or less;
• has a “teaser” interest rate that is at least three percent lower than
the fully-indexed rate (the relevant index at time of origination plus
the margin specified in the mortgage note);
• creates a debt-to-income ratio exceeding 50% if Fremont had
measured by the debt due under the fully-indexed rate; and
• extended 100% financing or the loan has a substantial prepayment
penalty or penalty that lasts beyond the introductory period.
Under the terms of the injunction, the Attorney General’s office must
receive 30 days notice prior to a foreclosure, and has 45 days to object the
Martha Coakley
proceeding. Fremont may then only proceed with a foreclosure over the A+ Massachusetts
Attorney General’s objection if Fremont files a request with the Court, and
the Court reviews the matter and agrees that a foreclosure is appropriate. In Won preliminary injunction
considering whether to allow the matter to proceed, the court will evaluate against foreclosures from
whether the loan is unfair and whether Fremont has taken reasonable Fremont Inc.
steps to work out the loan and avoid foreclosure through loss mitigation Promulgated rules banning
techniques. The injunction does not release borrowers from their monthly foreclosure rescue schemes
mortgage obligations. (The order is available here:http://www.mass.gov/
cago/docs/press/2008_02_26_fremont_pi.pdf Just filed suit against Option
One on multiple counts
Question Two asked attorneys general whether they supported the court’s
decision in this case, providing broad relief in the case that there was a Trained more than 150
clear pattern and practice of predatory lending and whether they would be attorneys to provide pro
bono defense
willing to pursue a similar strategy to General Coakley’s. Although there
was broad praise for the court’s decision and General Coakley’s diligent Advocated for stringent
work, many attorneys general expressed skepticism about the prospects federal regulation

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of pursuing similar cases in their home states, in some cases because of

varying statutory bases, but also in many cases because of the difficulty
in establishing a pattern if the office has not been highly engaged on
the constituent service work that brings those cases through a central
pipeline where such patterns can emerge. Certainly, in the near future as
more legal theories get tested in different states, there will be additional
case law established to provide a guide for attorneys general to take legal
action to protect borrowers, win compensation for the aggrieved, and
force changes from bad actors.

Another cutting-edge leader is New York Attorney General Andrew Cuomo,

who has notched several impressive victories to reform broken pieces of
the mortgage securitization industry, especially dealing with appraisal Andrew Cuomo
fraud and ratings agencies. In November 2007, Cuomo announced A+ New York
subpoenas of Fannie Mae and Freddie Mac, the two original government-
sponsored enterprises that are the largest securitizers of home loans. In Won major reforms from
Fannie Mae, Freddie Mac
March, Cuomo revealed an agreement with the two companies and the
Office of Federal Housing Enterprise Oversight that requires banks that Fought for transparency
sell residential mortgages to meet certain minimum standards, especially and independence in
relating to the independence of appraisals on which the loans are based, appraisals
where there had been widespread fraud across the industry.
Secured major reforms
In June, 2008, Cuomo made headlines again with his announcement of major from principal three ratings
reforms from the nation’s three big credit ratings agencies, whose rosy agencies
pictures of subprime mortgage-backed securities were relied on by investors New regulations ensure
that have since taken huge losses. The agreement with Standard & Poor’s, due diligence on loan
Moody’s, and Fitch increases the independence of the ratings agencies, underwriting
requires that crucial loan data be provided to the ratings agencies s o they
can actually perform due diligence, and takes other major steps with regard Outspoken advocate for
to transparency and openness of the ratings agencies. Cuomo has vowed that state and federal borrower
his investigation into the mortgage securitization industry will continue. protections

Although only a few attorneys general have pursued litigation against

the industry’s biggest players, many offices have engaged in extensive prosecution of “foreclosure rescue
consultant” scam artists. Often former mortgage brokers or real estate agents who are out of work in the
current down market, foreclosure rescue consultants make offers of assistance to delinquent borrowers
facing foreclosure, who are usually listed in required public notices. Through a variety of different schemes,
all promising to save the family from foreclosure, the consultants end up stealing the home or its equity.
It is certainly a positive indication of their growing grasp of the issue that so many attorneys general have
pursued legal actions against foreclosure rescue scam artists, and just as the scam artists will persist
throughout the crisis and grow more clever, so too must equity protection laws and enforcement of them.
Massachusetts Attorney General Martha Coakley issued an order effectively banning all foreclosure rescue
transactions that do not benefit the homeowner, and many other attorneys general are pursuing legislative
changes to crack down on these abusive practices in addition to prosecution.

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METHODOLOGY _____________________________________________________________________________________
Attorneys general were asked questions about nine different issue areas (see Appendix for a copy of the
original questionnaire, which is discussed in depth in the Findings section) and actionable strategies to
fight foreclosures. For each of these nine questions, attorneys general could earn up to two points, with
partial credit being awarded for answers that acknowledged the importance of or concern about an issue
area without committing to taking a given action. Finally, the extra credit section awarded up to seven
points based on other actions that attorneys general have taken to place their office on the frontlines of the
battle against foreclosures. For example, the letter signed by 40 attorneys general in support of the Miller-
LaTourette amendment to prevent federal preemption of state foreclosure laws, although drafted and sent
after the questionnaire had been distributed, was factored into the extra credit scores. The questionnaire
was distributed in March and April, and all responses received by this report’s publication were included in
its results.

The grades on the scorecard were based on a simple rubric out of the 25 possible points, with 0-4 points
receiving an F, 5-9 points a D, 10-14 points a C, 15-19 points a B, and 20-25 points an A, with the highest
number of points in each grade range receiving a plus and the lowest number of points in each grade range
receiving a minus (thus a score of 14 points received a “C+”, 15 a “B-”).

Because of varying statutory authorities, some attorneys general were not able to answer this questionnaire.
When an attorney general cited specific statutes curtailing their authority to fight against foreclosures, they
were given a grade of “Incomplete”, though in most cases there is still a role, however limited, they could
play in ameliorating the crisis, perhaps only with the bully pulpit. Florida Attorney General Bill McCollum
was the only respondent who specifically cited a statutory/structural inability to answer exactly three of the
questions, and still addressed the remainder; his score is based on a proportional scoring system with the
three questions he could not answer discounted from the equation. In Ohio, an incomplete was given not
for statutory reasons, but because there was a vacancy in the office during the survey’s response time, and
an interim attorney general has just recently been appointed.
Some attorneys general chose to respond to the questionnaire in writing, and to include supplemental
material. In other cases, attorneys general preferred to answer the questions in a public forum or meeting
with ACORN leaders. There were also some offices that declined to answer the questionnaire whatsoever,
and in those cases ACORN attempted to scour the public record of websites, press releases, and court
filings to give appropriate credit where it was due, though it is impossible to claim a truly exhaustive record.
Absent the statutory restrictions that led to an “Incomplete”, as discussed above, all attorneys general were
included within the survey and scorecard. 37 of 50 offices (not including Ohio) responded to ACORN’s
request for information about foreclosure activity, a number that exceeded our goal and expectations at the
outset of this project.

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APPENDIX ______________________________________________________________________________________________

ACORN Foreclosure Questionnaire

Lamentably, much of the current foreclosure crisis, which is sweeping across every state and wreaking havoc
on our communities and our markets, was entirely avoidable if we had strong predatory lending protections
in place. In a system as complex as the mortgage market, there is certainly much blame to go around for the
current failures, but so is there an urgent need for leadership. The public and media have too often looked
to the federal government for fixes, losing sight of many of the cutting-edge solutions that states generally
and attorneys general in particular have been promoting.
The questions presented below draw heavily on the current work of state attorneys general, and are intended
to highlight those that have been taking aggressive leadership in fighting back against the foreclosure crisis.
In addition to these questions, we have included an additional section to describe additional work being
done, so as to continue to recognize best practices and innovative leadership. We would encourage you to
take the opportunity to explain your answers, as we will be distributing the responses to ACORN members,
allies, and the media.
ACORN, the nation’s largest community organization of low- and moderate-income families, with more than
400,000 member families in 100 chapters, has been a leading voice for homeowners during the subprime crisis,
seeking both to reign in predatory lenders and seek equitable solutions to homeowners to avoid foreclosure.

QUESTION 1: Disclosure and transparency of mortgage servicing data

The Hope Now Alliance recently announced the headline-grabbing number that its members had completed
more than a million “workouts” since July, yet three fourths of these were repayment plans, which are much
more likely to fail and less likely to address the structural deficiencies of most subprime loans. Further, the
types of modifications were not discussed. Instead of industry press releases, the public and regulators
would benefit from hard, comparable numbers.
While there is no one body responsible for regulating servicers and monitoring compliance and progress
in modifications, the State Foreclosure Prevention Working Group has provided a valuable forum to collect
voluntary data. Most attorneys general are already working with the Group in some capacity, and its first
report in February 2008 analyzing servicing data. It is critical that this data reporting continue with high
compliance, and that it move toward producing more transparent and informative data.

Will you work with other attorneys general in asking mortgage servicers to report on a monthly
basis to the states the number and type of modifications granted, repayment plans offered, success
rates of each, and the number of foreclosure filings initiated?

QUESTION 2: Injunction against foreclosure filings from predatory lenders

Massachusetts Attorney General Martha Coakley recently won a decision granting a preliminary injunction
against all foreclosure filings made by Fremont Investment and Loan. The order, issued by Judge Ralph
D. Gants, prohibits Fremont from advancing or beginning foreclosure proceedings on any loan that is

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“presumptively unfair.” Under the order, a loan is considered presumptively unfair if it:
• is an adjustable rate mortgage with an teaser period of three years or less;
• has a “teaser” interest rate that is at least three percent lower than the fully-indexed rate
(the relevant index at time of origination plus the margin specified in the mortgage note);
• creates a debt-to-income ratio exceeding 50% if Fremont had measured by the debt due under the
fully-indexed rate; and
• extended 100% financing or the loan has a substantial prepayment penalty or penalty that lasts
beyond the introductory period.
Under the terms of the injunction, the Attorney General’s office must receive 30 days notice prior to a
foreclosure, and has 45 days to object the proceeding. Fremont may then only proceed with a foreclosure
over the Attorney General’s objection if Fremont files a request with the Court, and the Court reviews the
matter and agrees that a foreclosure is appropriate. In considering whether to allow the matter to proceed,
the court will evaluate whether the loan is unfair and whether Fremont has taken reasonable steps to work
out the loan and avoid foreclosure through loss mitigation techniques. The injunction does not release
borrowers from their monthly mortgage obligations.
See the order here: http://www.mass.gov/Cago/docs/press/2008_02_26_fremont_pi.pdf

Do you support the thrust of the court’s decision, and would you be willing to file a motion seeking
a preliminary injunction against all foreclosure filings from a lender or its servicer(s) that has a
demonstrated pattern and practice of “presumptively unfair” predatory lending in a similar case
given adequate resources?

QUESTION 3: Curbing predatory lending with federal legislation

Iowa Attorney General Tom Miller was among the strongest and earliest endorsers of Senator Chris Dodd’s
anti-predatory lending bill, the Homeownership Preservation and Protection Act (S. 2452), stating, “Predatory
lending is a serious problem and is one of the primary causes of the current subprime foreclosure crisis.
In order to prevent this from happening again, it is imperative that important reforms are made to correct
this market failure. Senator Dodd’s bill is strong and comprehensive in its efforts to reform this industry,
and I strongly support his bill.” The Dodd bill will establish new protections for all borrowers, crack down
on predatory practices in subprime lending, and clarify liability of the current mortgage holder so that
borrowers know from whom to seek a cure. Crucially, the Dodd bill allows the state attorneys general to
enforce the provisions without eclipsing or preempting state law.
Will you publicly support the Homeownership Preservation and Protection Act?

QUESTION 4: Establish a direct pipeline to assist borrowers in your state

Many governors and attorneys general have established 1-800 numbers for distressed borrowers to call for
more information about preventing foreclosure. Massachusetts Attorney General Martha Coakley not only
set up a 1-800 but trained 150 pro bono attorneys in a two-day session to handle foreclosure filings.

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Will you create (or do you currently have) a toll-free hotline to assist distressed borrowers in your
state, refer them to HUD-certified counseling agencies and pro bono attorneys, and collect information
about their cases that could lead to consumer protection litigation? Alternatively, if resources are too
scarce in your office to create such a line, will you advertise on your website and through other means
these types of resources for troubled borrowers?

QUESTION 5: Seek voluntary 60-day stay for distressed borrowers in assistance pipeline
Massachusetts has achieved nearly universal agreement from servicers to voluntarily offer a 60-90 day
stay for all distressed borrowers that enter the Commonwealth’s homeowner assistance hotline. Even the
industry nationally, through the Hope Now Alliance, has agreed to a 30-day stay for any borrower seeking
assistance.

Will you seek a voluntary 60-day stay for all homeowners facing foreclosure that call your state’s
hotline number or contact the lender with a HUD-certified counseling agency?

QUESTION 6: Federal legislation to prevent foreclosures

A recently introduced package of bills in Congress includes a number of critical pieces to address the
foreclosure crisis. Among other items, the Foreclosure Prevention Act of 2008 (S. 2636) would increase
disclosure requirements on mortgage documents, extend to five years the net operating loss corporate tax
break, provide CDBG money for purchase and rehabilitation of foreclosed properties, increase support for
housing counseling programs, and allow state housing finance agencies to issue bonds for refinancing.
Finally, the package will change the bankruptcy code to allow judges to modify terms on a first home for
borrowers who meet strict income and expense criteria, just as judges can currently do for vacation homes
and yachts. This final provision is expected to help 600,000 families.

Will you publicly support the Foreclosure Prevention Act?

QUESTION 7: Hold town hall hearings on foreclosures with community organizations

Michigan Attorney General Mike Cox held three well-attended and informative foreclosure-related public
meetings across the state. He is just one of many attorneys general that have taken advantage of the bully
pulpit and held town hall hearings across their states with community organizations and counseling agencies
in order to advertise options available for distressed homeowners as well as warn mortgagors against the
vulturine “foreclosure rescue” consultants that prey on homeowners in crisis.
Will you work with community organizations like ACORN to hold town hall hearings and other events to
educate the public about their options to avoid foreclosure and warn of potential dangers in foreclosure
rescue scams?

QUESTION 8: Pressure companies to come to table with community organizations

While the Bush Administration and Treasury Secretary Paulson have convened the Hope Now Alliance of

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mortgage industry representatives, its contributions so far to foreclosure avoidance have been limited. Hope
Now’s five-year teaser freeze plan only covers those borrowers that become delinquent because of a rate
reset between January 2008 and July 2010, and offers no assistance to the majority of subprime borrowers
who were delinquent prior to January 2008, those who become delinquent prior to a future rate reset, or who
fall behind for additional reasons beyond a rate reset. Most estimates put the number of borrowers eligible
for assistance under Hope Now between 175,000 and 240,000.
Recently, ACORN announced major reforms it had won from Countrywide, the largest servicer of subprime
loans, that will lead to streamlined modifications for many more classes of borrowers than are assisted by
Hope Now. This “Best Practices for Servicing Subprime Mortgages” agreement is expected to assist hundreds
of thousands of borrowers achieve an affordable monthly payment and avoid foreclosure when they become
delinquent on their subprime first mortgages.

Will you work with community organizations like ACORN to encourage lenders and servicers to sign
“best practices” agreements that move struggling families from the fast-track to foreclosure into
sustainable modifications with affordable monthly payments?

QUESTION 9: Support legislative solutions in your state

Minnesota Attorney General Lori Swanson fought side by side with Minnesota ACORN in helping Minnesota
adopt some of the nation’s toughest predatory lending laws last year, and is actively engaged in ongoing
foreclosure prevention efforts. While some attorneys general have the right to draft and file legislation, all
attorneys general have a bully pulpit from which to speak out in favor of changes to state law. The vast
majority of states are in serious need of updates in predatory lending and foreclosure law to address the
current subprime mess.
Will you actively work with your state legislature and endorse measures to improve predatory
lending protections for homeowners and reform the foreclosure process to encourage home retention
solutions?

QUESTION 10: EXTRA CREDIT

The previous nine questions have covered a number of different solutions, big and small, to the foreclosure
crisis that attorneys general can champion to help families avoid foreclosure, but clearly no limited set of
questions can cover the full scope of activities that attorneys general are engaged in with respect to the
foreclosure crisis.
Please take the time to share some of the initiatives that you have undertaken so that we can highlight
new and innovative work

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ACORN is the nation’s largest community organization of low-and

moderate-income individuals, with more than 400,000 member
families in 110 cities and 40 states fighting for financial justice.
We’re getting together to fight back against predatory lenders
and save peoples’ homes.

The ACORN Financial Justice Center is the central node

through which ACORN members fight against payday loans,
refund anticipation loans, predatory mortgage loans, and
other economic rip-offs that sap wealth from low-income
communities.

Austin King is the director of the ACORN Financial Justice

Center and can be reached at financialjustice@acorn.org for
questions about this and other efforts.

ACORN Financial Justice Center

2609 Canal Street • Suite 500 • New Orleans, Louisiana 70119
www.acorn.org • Phone: (504) 267-3755 • Fax: (504) 267-3751