In a Time of Universal Deceit, Telling the Truth is Revolutionary.
Monday, May 20, 2024

Feds crack down on lenders for foreclosure abuse


The federal government on Wednesday ordered 16 of the nation’s largest mortgage lenders and servicers to reimburse homeowners who were improperly foreclosed upon.

Government regulators also directed the financial firms to hire auditors to determine how many homeowners could have avoided foreclosure in 2009 and 2010.

Citibank, Bank of America, JPMorgan Chase and Wells Fargo, the nation’s four largest banks, were among the financial firms cited in the joint report by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency.

The Fed said it believed financial penalties were “appropriate” and that it planned to levy fines in the future. All three regulators said they would review the foreclosure audits. Under the agreements reached, the lenders and servicers have 45 days to hire an auditor and will “remediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies.” There is no minimum or maximum dollar amount identified.

In the four years since the housing bust, about 5 million homes have been foreclosed upon. About 2.4 million primary mortgages were in foreclosure at the end of last year. Another 2 million were 90 days or more past due, putting them at serious risk of foreclosure.

Critics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders. House Democrats introduced legislation Wednesday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.

“I want to know what abuses (the government agencies) identified, which banks committed them and how their proposed consent agreement is going to fix these problems,” said Rep. Elijah Cummings, D-Md., the ranking member of the House Government and Oversight Committee. “Based on what I have read … I am not encouraged at all.”

Sen. Tim Johnson, D-S.D., chairman of the Senate Banking Committee, said the agreements struck were a “step towards addressing the improper and fraudulent practices to which many of the country’s largest mortgage servicers have admitted.”

The other lenders and service providers cited by the agencies include: Ally Financial Inc., Aurora Bank, EverBank, HSBC, MetLife Bank, OneWest Bank, PNC, Sovereign Bank, SunTrust Banks, U.S. Bank, Lender Processing Services and MERSCORP.

Citigroup said in a statement that it had “self-identified” needed changes in 2009 and that it has helped more than 1.1 million homeowners avoid foreclosure.

“We are committed to working with our regulators to further strengthen our programs in these areas and meeting these new requirements,” the company said.

Ally Financial, formerly known as GMAC, said it had not found “any instance where a homeowner was foreclosed upon without being in significant default.”

Without specifically identifying instances of bad foreclosures, the government agencies noted in its report that the “deficiencies in foreclosure processing observed among these major servicers may have widespread consequences for the housing market and borrowers.”

John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer housing watchdog, said the government’s action is a year too late. It does little to help those who are just now wrestling with a foreclosure and those who have already been displaced, he said. Rather than moving swiftly to seize people’s homes, the banks should have done a better job helping people lower their mortgage payments through modification programs, he said.

“This should have happened a long time ago,” he said. “There are so many people who, if they had received a meaningful modification, could have stayed in their homes.”

Copyright © 2011 The Associated Press

4 thoughts on “Feds crack down on lenders for foreclosure abuse”

  1. I am torn with this story… I am glad that on some points that the financial institutions are being evaluated for improper acts, in this case foreclosures.

    But at the same time, there are so many aspects of the current lending/housing situation that I find repugnant. So many entities are at fault, it is hard to figure out where to start.

    Sure, there were the “predatory lenders” that went after the “sheep” to sign them up for loans that were ridiculous. Then there were the real estate speculators that used the retarted loans to inflate properties. Then there are the folks that ignored their means to jump into loans that they couldn’t possibly pay back (sounds like most of our Congress-Critters).

    At the end of the day, I find myself at the short end of the stick. I bought a house for my family on a fixed-rate loan within my means. Now, 5+ years later I am one of the millions of folks that is upside-down in their homes who will loose the most- because I pay my bills and did what was right. I am faced with having to move due to my job (military transfer) and loosing my shirt on my home.

    I am rambling, but it is frustrating that nobody is really being held accountable in this mess. I know it is over-simplifying but the root problem (in my humble opinion) is that we don’t hold individuals accountable for their actions. Nobody held a knife to peoples throat to get them to sign the papers on all of these mortgages- they should be held to task for their actions or go to jail. I’m not advocating letting the lenders off either, but P.T. Barnum said there was a sucker born every day and these suckers are grown adults and should also be held accountable.

    I guess the biggest test of character remains. I like to think I am a man of character- I am not looking to the GOVT for anything since I entered into a contract with my lender and I am a man of my word, so I will so what I have to do to live up to the obligations I made.

    I just wish I could figure out how to instill a sense of character into others, including our elected officials. My ramblings are again, out of frustration, but character maters and we as a culture seem to be running sadly low on character on many fronts….

  2. The banks don’t want loan modifications. They needed hard assets to cover their losses from the MBS/CDO fraud they perpetrated. They needed money on their balance sheets, any money, even half what was owed, to pay out the pyramid/ponzi scheme they created with MBS/CDO’s. What we need now isn’t a settlement, but criminal prosecution as this fraud was widespread and encouraged from the top leadership of the banks. I don’t know what else to call it but fraud and racketeering.

    They will cry a river and claim ignorance, but they were calling the loans “liar loans” for God’s sake. That was the bankers term for them. Now how could they not know that their “liar loans” weren’t AAA investments?

    Simple, they knew it, but didn’t care because they had short-term profit goals as they collected fees for making the mortgage and again for selling it out in a bundle. They didn’t care that their customers would get burned with those bad loans they made. And they expected the government to mis-use tax dollars to bail them out of their bad decisions, which is exactly what occurred. They threatened “financial Armageddon” in private conversations with Congress if they weren’t bailed out.

    Today, nothing has changed. Most of the people that buried our economy in bad loans and fraudulent debt are in the same positions or promoted. Expect another crash, and another, and another while the same players are in the same positions.

Comments are closed.