Government Agencies Probe Mortgage Companies over Foreclosure ScandalIn the ensuing mayhem following the U.S. mortgage crisis big banks like JP Morgan and Bank of America started skirting their own policies for filing foreclosure paperwork in order to meet the overwhelming demands.
According to their own regulations, and legal demands, bank officials are supposed to review all documents before approving the repossession of a home. With millions of homeowners defaulting on their
mortgage loan payments banks were using electronic signers and unqualified employees to sign off on hundreds of foreclosures without reviewing the paperwork. The faster they could get the foreclosure approved, the faster they could get the property into the hands of someone who could make the home mortgage payments.
On the other hand, foreclosure documents must be reviewed and filed in U.S. courts by hand before the home is repossessed.
Lawyers working on filing grievances on behalf of homeowners at risk of losing their houses noticed inconsistencies in the paperwork and sounded the alarm.
This means that hundreds of thousands of families possibly lost their homes unfairly.
In response to the scandal both Bank of America and JP Morgan called for moratoriums on foreclosures while they reviewed their practices. However, government agencies have deemed that this is not enough.
The Office of the Comptroller of the Currency (the
OCC) is one of several agencies stepping in. They will be reviewing the banks’ practices and policies to decide if any disciplinary measures are necessary.
Federal Reserve U.S. banking regulators are also leading an in-depth investigation on whether the banks were improperly signing off on foreclosures. Attorney Generals in each of the 50 states are also looking into the matter.
Bank irresponsibility was the cause of the mortgage crisis as they extended loans to unqualified and risky applicants. Property values have dropped significantly since they peaked in 2006, now 20% of homeowners owe more than their homes are worth.
Since 2008 2.5 million homes have been foreclosed on with another million estimated for this year.
Florida was the state hardest hit by foreclosures with a rate of 14%, almost 10 points higher than the national state average.
This foreclosure debacle is another example of faulty and fraudulent bureaucratic and banking systems that might still cause further harm to national financial institutions. What this shows is that further regulation and changes are necessary.