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Fed investigating mortgage malfeasance says Bernanke
WASHINGTON (10/26/10)--“Federal banking agencies are working together to complete an in-depth review of practices at the largest mortgage servicing operations,” and are “looking intensively at the firms' policies, procedures, and internal controls related to foreclosures” to help “determine whether systematic weaknesses are leading to improper foreclosures,” Federal Reserve Chairman Ben Bernanke said on Monday. The Fed will likely make the preliminary results of the review available next month, and the Fed will “take violations of proper procedures seriously,” Bernanke added. Various federal agencies will evaluate the impact that the foreclosure-related problems could have on the real estate market and financial institutions, Bernanke said. Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair in a separate speech backed up Bernanke’s comments, saying that the FDIC is working “to get to the bottom” of “concerns and claims that legal documents required for foreclosure have in some cases been improperly exercised – or ‘robo-signed’ – by mortgage servicers. The litigation generated by this issue could ultimately be very damaging to our housing markets if it ends up unduly prolonging those foreclosures that are necessary and justified,” Bair added. The House subcommittee on housing and community opportunity will also investigate potentially improper and illegal foreclosures on Nov. 18, Chairwoman Maxine Waters (D-Calif.) said this month. Waters has also promoted H.R. 3451, the Foreclosure Prevention and Sound Mortgage Servicing Act, a bill that would prohibit banks from initiating foreclosure proceedings without offering loss mitigation options to homeowners. A number of larger mortgage lenders have curtailed foreclosures or evictions in several states, and state officials nationwide are investigating claims of false mortgage documentation and verification that may have been used to justify hundreds of thousands of foreclosures. However, GMAC and Bank of America have recently signaled their intent to renew foreclosure processing. Credit Union National Association Chief Economist Bill Hampel has said that this temporary stall in foreclosure processing may aid credit unions by allowing them to get their own foreclosures off of their books quicker. Credit unions have seen limited increases in foreclosure-related activity due to the overall decline in the economy. However, the majority of credit unions were much more careful in their lending activities, and did not originate toxic mortgages nor engage in the subprime mortgage market. Bernanke made his remarks about the foreclosures at a joint Fed/FDIC conference highlighting policy-oriented research on U.S. housing and mortgage markets. Bernanke also touted the Mortgage Outreach and Research Effort (MORE), a program that combines the resources of 12 Fed banks and the Board of Governors to “promote fair and equal access to banking services and improve communities.” The Fed is also “conducting empirical research on mortgage and foreclosure related topics, and are reaching out to industry experts,” Bernanke added. For additional information on the MORE program, use the resource link.
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