A Supreme Court ruling in June gave states regulatory authority over banks, and now the attorneys general of several states are considering consumer fraud lawsuits against major mortgage lenders. The state authorities are angry about the vast number of foreclosures, and what they consider a lack of cooperation on the banks' part. "[The banks'] waterfall of excuses, the abysmal numbers of modifications, tells us persuasion is not working," said Arizona's attorney general, Terry Goddard, who added that "we're moving much closer to litigation."

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