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By ALAN ZIBEL

The Associated Press

Updated: 12:37 p.m. Wednesday, Oct. 13, 2010

Posted: 11:08 a.m. Wednesday, Oct. 13, 2010

WASHINGTON — Officials in 50 states and the District of Columbia have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.

The states' attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly.

Alabama initially did not sign on to the investigation. It reversed course after the joint statement was released.

Attorneys general have taken the lead in responding to a nationwide scandal that's called into question the accuracy and legitimacy of documents that lenders relied on to evict people from the homes. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them.

The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. Some foreclosures could be overturned. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.

The state officials said they intend to use their investigation to fix the problems that surfaced in the mortgage industry.

"This is not simply about a glitch in paperwork," said Iowa Attorney General Tom Miller, who is leading the probe. "It's also about some companies violating the law and many people losing their homes."

Ally Financial Inc.'s GMAC Mortgage Unit, Bank of America and JPMorgan Chase & Co. already have halted some questionable foreclosures. Other banks, including Citigroup Inc. and Wells Fargo & Co. have not stopped processing foreclosures, saying they did nothing wrong.

In a joint statement, the officials said they would review evidence that legal documents were signed by mortgage company employees who "did not have personal knowledge of the facts asserted in the documents. They also said that many of those documents appear to have been signed without a notary public witnessing that signature — a violation of most state laws.

"What we have seen are not mere technicalities," said Ohio Attorney General Richard Cordray. "This is about the private property rights of homeowners facing foreclosure and the integrity of our court system, which cannot enter judgments based on fraudulent evidence."

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October 13, 2010 12:37 PM EDT

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