A pre-election outcry from lawmakers and consumer groups is pressuring banks to put a lid on foreclosures throughout the nation. As the deluge of defaults flood in, banks are being accused of processing foreclosure files without verifying the information; and although it is not clear that homes are being wrongfully repossessed, some banks have taken measures to at least stop selling the foreclosed properties until they can get a firm handle on their verification procedures. See the following article from The Street for more on this.
Pressure heated up on Friday for banks to completely halt foreclosure proceedings, with top lawmakers and consumer groups calling for a country-wide moratorium.
Senate Majority Leader Harry Reid, R-NV, joined the chorus of requests on Friday, advocating that major lenders stop foreclosures nationwide.
Reid’s home state of Nevada has been the worst hit by the foreclosure crisis, with one out of 84 homes receiving a notice in August, 4.5 times the national average.
“It is only fair to Nevada home owners to suspend foreclosures until a thorough review of foreclosure processes is completed and home owners can be assured that their documents are being analyzed properly, “said Reid.
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Rep. Edolphus Towns, D-N.Y., who chairs a House committee on oversight and government reform, also urged lenders to “immediately and voluntarily suspend foreclosure proceedings in all 50 states and the District of Columbia until the banks complete internal investigations into their company’s mortgage servicing and foreclosure practices.”
The pressure comes ahead of a tough election battle next month. Democrats are presenting themselves as champions of average consumers to retain middle-class support.
It also comes as an array of parties – from attorneys general to foreclosed-upon homeowners and investors behind mortgage debt – have begun taking banks to court over what they allege to be fraudulent practices. For instance, employees hired by some banks have admitted to “robosigning” thousands of court documents under oath without having verified any of the information. In some cases, signatures appear to have been forged.
“The widespread reports that lenders and servicers had employees sign thousands of foreclosure papers a day shows that they failed to follow the most basic standards of honesty and decency,” said Consumers Union’s Gail Hillebrand, who also called for a countrywide foreclosure moratorium. “Foreclosures must stop until we can be sure that these problems are completely cleaned up. We need both thorough independent audits and strong regulatory scrutiny.”
Bank of America (BAC_) stopped just short of those requests, saying it would halt foreclosure sales – but not proceedings – in all 50 states. That means the foreclosure process will continue for defaulted borrowers, but the bank has requested that courts forestall making a final decision until all documents can be reviewed.
“We will stop foreclosure sales until our assessment has been satisfactorily completed,” the bank said in a statement. “Our ongoing assessment shows the basis for our past foreclosure decisions is accurate.”
PNC Financial Services (PNC) has reportedly decided to do the same for a month while it reviews its processes. Earlier in the week, BofA, JPMorgan Chase (JPM) and GMAC Mortgage all said they would halt foreclosure sales in 23 states. Regulators and attorneys general are also scrutinizing the practices of other major lenders, including Wells Fargo (WFC), Citigroup (C) and U.S. Bancorp (USB), though those firms haven’t announced agreements to halt proceedings.
“Wells Fargo is not planning to initiate a moratorium on foreclosures,” the bank said in a statement earlier this week. “Our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”
Citigroup said, “At this point, we have no reason to believe our employees haven’t been following our procedures, so we do not believe a suspension is necessary.”
This article has been republished from The Street. You can also view this article at The Street, an investment news and analysis site.