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Obama issues pocket veto of foreclosure docs bill

WASHINGTON, D.C. — President Barack Obama will use a rare “pocket veto” to reject a bill that the White House fears could worsen the mounting problems caused by flawed or misleading documents used in foreclosures.

White House press secretary Robert Gibbs said Thursday that Obama is sending a newly passed notarization bill back to Congress to be fixed because the current version has “unintended consequences on consumer protections.”

A pocket veto is a tactic for killing a bill that can be used only when Congress is not in session. It essentially takes effect when the president fails to sign a bill within 10 days. Obama has yet to issue a traditional veto during his presidency; he has used a pocket veto once before, in December 2009, to address what amounted to a technicality on a defense spending bill.

In the current case, Obama will not sign a bill that would allow foreclosure and other documents to be accepted among multiple states. Consumer advocates and state officials had argued the legislation would make it difficult for homeowners to challenge foreclosure documents prepared in other states.

O. Max Gardner, a consumer lawyer in Shelby, N.C., said the bill would have made the problems with foreclosure documents worse, since mortgage companies would have been able to mass-produce documents and affix a digital version of a notary’s seal rather than one on paper.

“They could process more foreclosure cases with improper and invalid documents and make it more difficult for consumers to try to fight,” he said.

Attorney General Eric Holder said Wednesday that the government is looking into allegations that mortgage lenders have been evicting homeowners using flawed court papers.

Three banks have halted foreclosures in 23 states after evidence surfaced that their employees or outside lawyers signed documents without reading them or filed inaccurate paperwork. State and federal officials have been ramping up pressure on the mortgage industry over concerns about potential legal violations.