NEW YORK (TheStreet) - Wells Fargo (WFC) became the latest target in a state attorney general's wide-ranging foreclosure probe, while mortgage insurer stocks plunged dramatically on The PMI Group's (PMI) continued losses.
Wells ended the day up 0.7% to close at $25.94 after the bank provided what it called an "update" on foreclosure proceedings Wednesday evening. Wells disclosed that it was resubmitting 55,000 affidavits in 23 states where courts decide on foreclosure proceedings. The move was a sharp reversal from Wells' earlier statements that its foreclosure processes and documentation weren't in need of reform.
Competitors JPMorgan Chase (JPM) and Bank of America (BAC) have also had to review more than 100,000 documents each for potential flaws. The moves come after disclosures that major servicers engaged in so-called "robosigining" - signing off on hundreds of foreclosure documents a day without properly vetting the information.
Following Wells' disclosure, Ohio Attorney General Richard Cordray turned his attention to Wells Fargo, saying the bank is now "the focus for a new prong of our ongoing investigation." The AG filed suit against GMAC Mortgage earlier this month, seeking $25,000 for each foreclosure document that's found to have been handled improperly. He and the 49 other attorneys general across the country have launched a broad investigation into the practices of large mortgage servicers."The big mortgage servicers and financial firms continue to demonstrate their belief that they do not need to play by the same rules as everyone else who uses our court system," Cordray said in a statement. "The suggestion by Wells Fargo and its colleagues at several other national firms that they can cure fraudulent testimony by simply refiling new affidavits and continuing to proceed toward foreclosures shows they do not recognize the seriousness of the problem they have created. There is no simple 'do-over' for false testimony that will be likely to avoid sanctions and penalties imposed by the courts." As that was playing out on Thursday, shares of mortgage-insurers were plunging dramatically. PMI fell 19% to close at $3.33 after reporting a thirteenth straight quarter of losses. Competitors Radian Group (RDN) and MGIC Investment Corp. (MTG) also fell 9.9% to $7.65 and 5.1% to $9.21, respectively. Those firms have heavy exposure to the foreclosure situation, since they insure investors against losses on mortgage-bond defaults. Broadly speaking, financial stocks trended downward on Thursday as the "foreclosuregate" scandal continued to play out. The KBW Bank Index of large-cap stocks fell 0.4% to 45.54, with several regional components weighing down the index.
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