Bank Foreclosure Procedures Closely Scrutinized

By Louis Hanks on April 19, 2011, 7:10 pm

“These comprehensive enforcement actions, coordinated among the federal banking regulators, require major reforms in mortgage servicing operations,” said acting Comptroller of the Currency John Walsh. “These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers. Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward.”

NPA

Fearful of a middle-of-the-road deal—the attorneys general reportedly didn’t interview any witnesses or subpoena any documents before meeting with the banks—community-based groups like NPA, Jobs with Justice and PICO National Network have kept up the pressure on Miller and other officials. They see the investigation as an opportunity for both punishment and structural changes to avoid millions of additional foreclosures that benefit no one except banks, which often charge hefty foreclosure fees, and lucky investors, who snap up homes at rock-bottom prices. (By 2012, Californian local governments alone will have spent $17.4 billion on foreclosure-related costs, according to PICO’s March report, “Home Wreckers: How Wall Street Foreclosures Are Devastating Communities.”) The groups have held street protests and organized nationwide “call-ins” to AG offices to demand criminal charges and systemic change.

 

Files

What was not looked for is far more significant. Because so few files were examined, the regulators’ report says, “the reviews could not provide a reliable estimate of the number of foreclosures that should not have proceeded.” So much for the burning question of the extent of wrongful foreclosures. The reviews also did not look at potential abuses outside the foreclosure process, including unreasonable loan fees and misapplied loan payments. Such faulty charges can precipitate default by making it impossible for borrowers to catch up on late payments.