Mortgage problems said to run deep
Overhaul sought of servicing system
WASHINGTON — The problems in the mortgage industry go far beyond the controversy over flawed foreclosure documents and call for an overhaul of the system of administering home loans, the state attorney general leading a nationwide investigation told a Senate panel yesterday.
As Iowa Attorney General Tom Miller testified at a hearing of the Senate Banking Committee, senators also insisted that focusing solely on the so-called robo-signing is a mistake. And the banking industry was criticized for maintaining that the problem was mainly technical.
That view “shows a certain type of arrogance,” Miller said.
“There’s so much at stake,” he told the panel. The entire system of servicing and modifying mortgages and foreclosing on borrowers must be changed “so that it works productively,” he said. A resolution could involve penalties for mortgage companies that do not comply with required practices, Miller said.
“We’ll need, ultimately, agreement from the banks and so far our discussions have been productive,” he said.
CNBC reported that Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo & Co. are nearing a settlement with the 50 attorneys general in which they would compensate borrowers whose homes were improperly foreclosed upon.
But Miller said after the hearing that a settlement was not close. “That’s totally wrong. We’re a long way from an agreement,” he told reporters. “We’re at the beginning stages of a negotiation.”
Senator Christopher Dodd, a Connecticut Democrat, the panel’s chairman, said many people believe the problems with shoddy paperwork in foreclosures “are simply the tip of a much larger iceberg, that they are emblematic of much deeper problems in the mortgage servicing business — problems that have resulted in homeowners losing their homes in unjustifiable foreclosures.”
Senator Jon Tester, Democrat from Montana, said some in the industry “have been a little bit glib.”
The banking panel was examining the issue amid growing concern and public anger over the disarray stemming from faulty foreclosure documents. A man in the audience in the hearing room interrupted testimony by a JPMorgan Chase official, standing and shouting, “He is lying.” The demonstrator, from the Neighborhood Assistance Corporation of America, was removed from the room by police.
Employees or contractors of several major banks have testified in court cases that they signed, and in some cases backdated, thousands of certifying documents for home seizures. Financial firms that service a total $6.4 trillion in mortgages are involved. Bank of America, JPMorgan Chase, and Ally Financial Inc.’s GMAC Mortgage have suspended foreclosures for some period because of flawed documents.
Barbara Desoer, the president of Bank of America’s home loans division, told the banking committee the company is making changes in its foreclosure process after an extensive review found areas needing improvement. The bank found in its review that its foreclosure decisions weren’t based on inaccurate documents but did see ways the paperwork could be improved, Desoer said.
Among the changes, the legal documents used in the process will each be reviewed by the signer and promptly notarized, she said.
Desoer said the bank is replacing and resubmitting affidavits that were filed previously in about 102,000 foreclosure cases that have not yet gone to judgment in the 23 states where courts play a role in the process. Also, Charlotte, N.C.-based Bank of America is putting in new procedures for selecting and monitoring the law firms it retains to process foreclosures.