ConsumerWatch: Feds Impose New Regulations On Mortgage Industry

WASHINGTON (CBS/AP) – 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 by CBSSan Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)


One Comment

  1. bart simpson says:

    The “Stated Income” frauds that people comitted should also be ajudicated…simply look at the “stated income on the 1003 and compare to the w-2 forms of that year. SIMPLE

  2. Terri Conklin says:

    The Financial Revival Group, Inc provides FREE workshops every 2 weeks in the Seattle area of Washington state and in Minnesota to educate Underwater Homeowners about ALL of their options.
    I believe the banks should be ashamed of the way they have treated American homeowners / taxpayers, the very people that provided the TARP funds that have helped banks be solvent and profitable.
    The government is trying to make the banks/lenders act in a more reasonable and fair way; however the bottom line is that Banks are in business to make money, at the expense of their customers, The sooner we customers accept that fact, the sooner we will hold them accountable for their actions and start using credit unions instead of the BIG BOYS that consider themselves to be above reproach. The fact of the matter is that Real Estate values are going to continue to decline…if this happened to your 401k wouldn’t you stop investing in it? Or any other investment?

Leave a Reply

Fill in your details below or click an icon to log in:

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

More From CBS San Francisco

Get The New CBS SF Bay Area Local App
Got Our Weather App?

Listen Live