Reg­u­la­tors to be pressed on fore­clo­sure lapses

The Pak Banker - - International3 -

WASHINGTON: U.S. reg­u­la­tors will be un­der pres­sure Wed­nes­day to show law­mak­ers they are bet­ter polic­ing fore­clo­sures amid wide­spread ev­i­dence that len­ders used shoddy pa­per­work to evict delin­quent bor­row­ers.

The Se­nate Bank­ing Com­mit­tee is hold­ing a hear­ing on prob­lems in the mort­gage ser­vic­ing in­dus­try and whether they pose a broader risk to the econ­omy or amount to an iso­lated if net­tle­some prob­lem.

The is­sues fac­ing the still­strug­gling hous­ing mar­ket have been ex­ac­er­bated by al­le­ga­tions that banks have used "ro­bosign­ers" to sign hun­dreds of fore­clo­sure doc­u­ments a day with­out proper le­gal re­view.

Reg­u­la­tors have been crit­i­cized for not catch­ing the wide­spread flaws, which have reignited pub­lic anger with banks that re­ceived bil­lions of dol­lars in tax­payer aid dur­ing the fi­nan­cial cri­sis.

Fed­eral bank reg­u­la­tors and all 50 state attorneys gen­eral are prob­ing Bank of Amer­ica JPMor­gan (JPM.N), and other ma­jor mort­gage ser­vicers, many of whom tem­po­rar­ily halted fore­clo­sures to ex­am­ine their prac­tices, only to then re­sume them.

These reg­u­la­tors, in­clud­ing Fed­eral De­posit In­surance Corp Chair­man Sheila Bair and Fed­eral Re­serve Gover­nor Daniel Tarullo, are ex­pected to pro­vide an update on the probe and how big a threat the doc­u­men­ta­tion prob­lems could pose to the banks and hous­ing mar­ket re­cov­ery.

Rep­re­sen­ta­tives from mort­gages fi­nance com­pa­nies Fan­nie Mae and Fred­die Mac have also been sum­moned to ap­pear.

Fan­nie Mae and Fred­die Mac of­fi­cials will likely be ques­tioned on their re­cent de­ci­sion to re­sume sales of fore­closed prop­er­ties.

"I want to hear why they feel that they have cor­rected poli­cies that have al­lowed the fore­clo­sures to take place with­out the rub­ber stamp­ing and all the ex­cesses that took place in the fore­clo­sure prac­tices," Robert Me­nen­dez, chair­man of the Se­nate bank­ing panel's hous­ing sub­com­mit­tee, told Reuters.

Much of the ac­tion per­tain­ing to fore­clo­sures is tak­ing place out­side Washington, with state attorneys gen­eral tak­ing a prom­i­nent role in in­ves­ti­gat­ing the ser­vic­ing prob­lems.

Of­fi­cials from Bank of Amer­ica and JP Mor­gan Chase have said they would like to have a set­tle­ment with states soon, but so far a deal re­mains elu­sive and it could be months be­fore one is reached.

The attorneys gen­eral are gath­er­ing in Florida this week for the win­ter meet­ing of their na­tional as­so­ci­a­tion. Among their guests will be El­iz­a­beth War­ren, Pres­i­dent Barack Obama's top ad­viser on con­sumer is­sues.

War­ren was sched­uled to at­tend a re­cep­tion Tues­day night to hear where the attorneys gen­eral fore­clo­sure in­ves­ti­ga­tion stands and to pro­vide state of­fi­cials with an update on ef­forts to stand up the new Con­sumer Fi­nan­cial Pro­tec­tion Bureau. Attorneys gen­eral and law­mak­ers have taken aim at the so-called "dual track" prac­tice in which mort­gage ser­vicers go ahead with fore­clo­sure pro­ceed­ings even as they ne­go­ti­ate pos­si­ble loan mod­i­fi­ca­tions aimed at keep­ing strug­gling bor­row­ers in their homes. -Afp

MUM­BAI: A worker uses a gas cut­ter at a metal work­shop in Mum­bai Wed­nes­day. In­dia's man­u­fac­tur­ing sec­tor ex­panded at its fastest pace in six months in Novem­ber on the back of ro­bust new busi­ness and a sharp rise in ex­port or­ders, a sur­vey showed on Wed­nes­day. -Reuters

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