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Federal regulators' report on foreclosures expected in early 2011; MERS, LPS under scrutiny

By Ariana Eunjung Cha

elizabethduke.jpg

(Photo Credit: AP Photo/Dennis Cook)

The four major federal regulatory agencies overseeing banks are conducting a joint investigation into residential foreclosure practices and policies that involves visiting mortgage servicers and reviewing sample loan files, according to a Federal Reserve official.

In prepared remarks by a Federal board member to be delivered Thursday before the House subcommittee on housing, Elizabeth A. Duke says that investigators are expected to conclude the on-site portion of the examination process by the end of this year and plan to publicly release a summary report highlighting the industry-wide findings in early 2011.

Duke said the Fed, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp. are working together on the probe that involves "sampling loan files to test the effectiveness of those policies, procedures and internal controls."

"We are prepared to take supervisory action where necessary and appropriate to hold institutions accountable for poor practices," Duke said.

In addition to the potential harm to consumers, Duke said, the Fed is also "evaluating the potential macroeconomic effects of foreclosure documentation problems to the mortgage and housing markets."

Another federal regulator--John Walsh, the acting Comptroller of the Currency--is scheduled to testify before the committee on Thursday that the government's examination of foreclosures is not just limited to banks. Walsh said in prepared remarks that officials are also looking at the role of the Mortgage Electronic Registry Systems--the tracking system for mortgage assignments created by the financial industry--and at Lender Processing Services, the Jacksonville, Fla.-based company that tracks mortgage payments and prepare foreclosure documents for numerous big banks.

Walsh also offered somewhat of a mea culpa regarding regulators' failure to catch the growing problems earlier.

"The lapses that have been reported represent a serious operational breakdown in foreclosure governance and controls that we expect national banks to maintain," Walsh said. "These lapses are unacceptable, and we are taking aggressive actions to hold national banks accountable, and to get these problems fixed."

By Ariana Eunjung Cha  | November 17, 2010; 4:18 PM ET
Categories:  Federal Deposit Insurance Corp., Federal Reserve, Housing  
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Comments

Let me tell these govt agencies that this smelly mess isn't going to be covered up. Citizens expect criminal indictments and anything less will result in more problems for the Obama administration. Banks have had their last free ride on the backs of taxpayers. Billions of dollars are owed to local govt agencies in lost title registration fees. Please be thorough but understand that banks will be held accountable.

Posted by: Desertdiva1 | November 17, 2010 6:19 PM | Report abuse

Huh "take supervisory action". What's that? Martha Stewart in the can and they couldn't find Madoff with a bloodhound.

Posted by: jobandon | November 17, 2010 6:37 PM | Report abuse

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Posted by: lizhiyong120 | November 17, 2010 10:16 PM | Report abuse

All we need them to do is to tell us how big a problem MERS really is and then all hell is going to break loose.

Posted by: Anonymous | November 17, 2010 10:34 PM | Report abuse

I trust the regulators will REQUIRE the banks to take whatever action is needed and make whatever expenditures that are required to PROVE they have proper standing when they forclose property.

I also trust the regulators will require banks to retroactively resolve EVERY case where they forclosed WITHOUT having the proper standing, in order that property title is clear.

Posted by: shadowmagician | November 17, 2010 11:58 PM | Report abuse


It pays to shop around for a mortgage refinance. Mortgage rates have gone down like anything. My brother in law just got a 30-year fixed loan at 3.76% He told me search online for "123 Mortgage Refinance" for the lowest rate.

Posted by: Anonymous | November 18, 2010 12:44 AM | Report abuse

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Posted by: abulaw | November 18, 2010 2:16 AM | Report abuse

The Washington Post is doing its readers a DISSERVICE by failing to actually FOLLOW UP on the fraud by examing primary documents DIRECTLY. This could be EASILY DONE. Drawing a RANDOM sample of mortgage assignments used in foreclosures from ANY STATE and then having these checked by experienced experts will reveal that essentially ALL of the assignments being used in foreclosures are actually FORGERIES.

I am NOT talking about robo-signing. I am talking about documents which purport to memorialize transactions which NEVER TOOK PLACE. And I am talking about well over 1 million criminal assignment forgeries nationally.

You can WAIT for the "regulators" to do their study and then "report it". Or YOU can do a statistically rigorous study and SHOW that the OBAMA administration is seeking to COVER UP a problem that it has known about for two years!

You show me an assignment. I can show you the FORGERY!

Posted by: Anonymous | November 18, 2010 2:50 AM | Report abuse

And in the meantime? Business as usual for the banks and lenders - while a "sampling" of paperwork is checked.

Posted by: Utahreb | November 18, 2010 7:31 AM | Report abuse

Ms. Cha,

Thank you for your continued overage of the mortgage meltdown overall. You have been instrumental in exposing more and continued layers of fraud involved.

As was suggested above I also believe it is of vital importance that sources independent of our regulatory agencies do studies of their own, and further that the results be published.

Katherine Porter Iowa University Law did a study titled "Misbehavior and Mistake in Bankruptcy Mortgage Claims" in 2007 in which she found "A majority of mortgage claims are missing one or more of the required pieces of documentation for a bankruptcy claims." The full study is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1027961

The Cook County Illinois Sheriff recently pulled 400 case files of foreclosed properties to see if the required documentation was included in the files and determined that only 5% had the required documents. As a result he has halted evictions in Cook County.

William Black has written and spoken of the utter lack of regulatory enforcement, and also of our "captive regulators." This presents a "fox guarding the hen house" scenario.

I no longer believe it is reasonable to trust our regulators and elected officials to do the job we have entrusted them to do - enforce our laws and protect citizens.

Our regulators have been made aware of the many violations of federal and state regulation and statute and this awareness goes back several years. Numerous complaints have been filed in the offices of Thrift Supervision, Office of the Comptroller of Currency, in state Attorney General offices, etc. I know this because I have talked to numerous people that have filed these complaints and have read a number of them myself. Yet these officials have taken no substantive or appropriate action.

The accountability that is needed in order to resolve this crisis will only be meted out if independent reviews of mortgage loan files are conducted AND the results are made public.

Posted by: StupendousMan-DefenderofLibertyFoeofTyranny | November 18, 2010 11:21 AM | Report abuse

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