Oct 07 2010

Pressure Grows for Foreclosure Investigation

National Journal's Congress Daily

Lawmakers continued their calls today for an investigation into home lenders who allegedly short-circuited state laws in their quest to foreclose on thousands of delinquent homeowners.

Senate Banking ranking member Richard Shelby said his panel should start an immediate investigation after Ally Financial, JPMorgan Chase, and Bank of America suspended foreclosure proceedings in 23 states amid allegations that their employees did not follow the law, such as by hastily signing thousands of documents without reading them to verify facts or not having a notary public present to verify.

"Federal banking regulators should immediately review the mortgage servicing and foreclosure activities of Ally Financial, JPMorgan Chase and Bank of America. The regulators should determine exactly what occurred at these institutions and make those findings available to the Banking Committee without delay," Shelby said. "Because it appears that the regulators have failed yet again to properly supervise the entities under their jurisdiction, the committee should immediately commence a separate, independent investigation into these allegations."

Shelby's comments came as administration aides met tonight to discuss the issue. House Speaker Nancy Pelosi and 31 other House Democrats from California on Monday wrote to ask federal regulators to look into into possible violations of law. Reps. Luis Gutierrez, D-Ill., and Dennis Moore, D-Kan., called today for an investigation into lenders that received Troubled Asset Relief Program funds.

"The American people helped out these companies and the least they deserve is a guarantee of due process and fairness when faced with something as profoundly life-changing as a foreclosure," the two wrote to TARP Special Inspector General Neil Barofsky, as well as to Sen. Ted Kaufman, D-Del., the new chairman of the Congressional Oversight Panel that oversees TARP, and Acting Comptroller General Gene Dodaro of the Government Accountability Office.

"It is nothing short of a perversion of the system that these companies in turn put many of these American taxpayers on the street through unwarranted foreclosures and evictions," the letter said.

Banking representatives argued that the issue was more of technical nature, rather than substantive claims of serious wrongdoing. They are opposed to a nationwide foreclosure moratorium because it would lengthen a recovery of the housing market, in that many of the homeowners affected would eventually lose their houses because they could not make payments.

"The issue is not about substance of the underlying document, it is about the technical requirements of the affidavit," said Scott Talbott, vice president of government affairs for the Financial Services Roundtable. "There is nothing wrong with the underlying document."