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NY Attorney General candidate backs foreclosure freeze

By Edith Honan

NEW YORK (Reuters) - The Republican candidate for New York attorney general, Dan Donovan, on Wednesday endorsed a call by attorneys general from all 50 states to halt home foreclosures after widespread allegations of faulty paperwork.

The foreclosure documents fiasco, in which banks are accused of using "robo-signers" to sign hundreds of foreclosure documents a day, has reignited public anger at banks, blamed for helping to cause the 2008 financial crisis and deep U.S. recession.

Regulators, including all 50 state attorneys general, are examining foreclosures after revelations that some paperwork at the largest U.S. bank, Bank of America Corp, and Ally Financial Inc's GMAC Mortgage unit was handled sloppily, and perhaps not at all.

A New York judge on Wednesday ordered lawyers handling foreclosures in the state for banks and servicers to sign a form verifying the procedure had been done properly -- making New York the first state to have such a requirement.

"I think it's easier to put a halt on (foreclosures) now so you can figure it out," Donovan told Reuters in an interview.

"You have to examine these things, as difficult as it's going to be because of the volume of them ... because there are some legitimate foreclosures also," he said.

Donovan, a Republican, said that as the District Attorney on the New York City borough of Staten Island for the past seven years he has reached out to minority communities, where he said families have been targeted by "unscrupulous" mortgage activity.

Asked if he though foreclosures should be frozen across the country, he said he could only speak for New York.

"I think we would have to examine the validity of a complete moratorium," he said. "I don't know what the other states' problems are. But in New York I think we have a big problem."

Donovan will face off against Democratic State Senator Eric Schneiderman on November 2 to become the next New York attorney general -- a post made famous when Democrats Eliot Spitzer and Andrew Cuomo used the job to prosecute securities fraud, insider trading and other Wall Street abuses.

Spitzer, who earned the nickname "sheriff of Wall Street," became governor in 2006 but resigned after 14 months amid a prostitution scandal. Cuomo is now running for governor and is expected to be elected in November.

Donovan, endorsed by the New York Post, said he will work to root out misdeeds on Wall Street but said the next attorney general must go beyond slapping fines on perpetrators of financial crimes.

"I don't want these settlements and these fines to be the cost of just doing business," he said.

Schneiderman, who won the endorsement of the New York Times, has embraced the "sheriff of Wall Street" tag and has said New York needs an attorney general who is not afraid to take on powerful interests.

(Additional reporting by Ellen Wulfhorst, Mark Egan, Joan Gralla, Martha Graybow and Jonathan Stempel; Editing by Philip Barbara)

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