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Banks 'Too Big to Care': Watchdog (Update 1)

Bank lawsuit story updated with additional information, comments from Attorney General Martha Coakley.

NEW YORK ( TheStreet) -- Massachusetts Attorney General Martha Coakley announced on Thursday that her office is filing a lawsuit against five banks including Bank of America (BAC - Get Report) and JPMorgan Chase (JPM - Get Report), for alleged unlawful and deceptive practices in the foreclosure process.

The lawsuit also names Citigroup (C - Get Report), Wells Fargo (WFC - Get Report) and Ally Financial as well as Mortgage Electronic Registration System and its parent MERSCORP as defendants.

The complaint accuses the banks of unlawful foreclosures through the pervasive use of false documentation including "robo-signing,", foreclosing homeowners when they did not hold the mortgage, corrupting Massachusetts' land recording system through the use of MERS and failing to uphold loan modification promises to Massachusetts homeowners.

The lawsuit sought "real accountability" from the banks for their role in making unlawful and deceptive foreclosures and "real and enforceable relief" to homeowners of Massachusetts.

Attorney General Coakley said during a press conference that banks had proved that they were "too big to care" about the impact of their behavior on homeowners, cities and states.

While she had been hopeful that the settlement talks which had begun a year ago will be concluded by now, the banks had failed to offer meaningful and enforceable relief to homeowners in Massachusetts.

She declined to comment on the amount of damages the lawsuit is seeking, but said it will be "a lot".

The lawsuit is being seen as a potential setback for settlement talks between banks and the 50 state Attorneys General but does not come as a surprise. Coakley had indicated earlier in August that she was unhappy with the negotiations, saying she had "lost confidence" in the pace and ability of the banks to reach an agreement.

She indicated that she was still open to joining the settlement efforts if the terms adequately address the interests of Massachusetts.

--Written by Shanthi Bharatwaj in New York

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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