Legislators Push for Nat’l Standards to Avoid Unfair Treatment and Wrongful Foreclosure on Homeowners
A GAO report released today by U.S. Sens. Al Franken (D-Minn.) and Robert Menendez (D-N.J.), and Reps. John Conyers (D-Mich.), Luis V. Gutierrez (D-Ill.), and Mike Capuano (D-Mass.) confirmed reports that mortgage servicers had been fraudulently signing or notarizing affidavits allowing the completion of foreclosures without any personal knowledge of the cases, a process more commonly referred to as “robo-signing.” The legislators commissioned the report, entitled Mortgage Foreclosures: Documentation Problems Reveal Need for Ongoing Regulatory Oversight, to investigate news accounts that homeowners were being improperly foreclosed on. In an effort to prevent future wrongdoings by mortgage servicers, the legislators today pressed banking regulators to implement safeguards recommended by the report that would ensure homeowners do not wrongfully lose their homes.
“We write today to urge you to develop a coordinated plan to ensure comprehensive oversight of federally regulated mortgage servicers and to reiterate our calls for national servicing standards that specifically address the foreclosure process,” the legislators wrote in a letter to banking regulators. “We have seen countless examples of servicers giving borrowers the run-around and continuing the foreclosure process when a loan modification has already been obtained. Perhaps the most egregious cases of servicer wrongdoing have been violations of the Servicemembers Civil Relief Act by wrongly foreclosing on active-duty servicemembers. Correcting these problems and ensuring they do not reoccur should be a priority for all of your agencies.”
The GAO report concluded that:
- Despite various federal agencies’ having the authority to oversee mortgage servicers, past oversight of mortgage servicers’ foreclosure activities has been limited and fragmented;
- It remains unclear how regulators and the new Consumer Financial Protection Bureau will share the responsibility of overseeing servicers, continuing the potential for poor and inconsistent oversight; and
- National standards for mortgage servicers that address expectations for the foreclosure process could improve the ways servicers do business.
GAO recommends that banking regulators and the Consumer Financial Protection Bureau:
- Develop plans for overseeing mortgage servicers; and
- Include foreclosure practices in any servicing standards that are developed.
The letter from the legislators to Ben S. Bernanke, Chairman of the Board of Governors of the Federal Reserve System; John G. Walsh, Acting Comptroller of the Currency Office of the Comptroller of the Currency; Sheila C. Bair, Chairman of the Federal Deposit Insurance Corporation; John E. Bowman, Acting Director of the Office of Thrift Supervision, and Elizabeth Warren, Special Advisor for the Consumer Financial Protection Bureau can be read here.
The GAO’s full report can be found here.