New York City Comptroller John C. Liu has called on the directors at Bank of America, Wells Fargo, JP Morgan Chase and Citigroup to conduct an independent audit of their mortgage and foreclosure practices.
Liu, who is a trustee of the New York City Pension Funds called upon the banks to perform the audit on behalf of the group. The proposal asks that the banks review their internal controls regarding loan modifications, foreclosures and securities and report the findings by the end of September 2011.
These four banks together make up 56 percent of the nation's mortgage industry.
""We raised concerns with the banks in July that misaligned incentives, inferior customer service and repeated requests for paperwork were undermining the loan modification process and leading to unnecessary foreclosure for homeowners,"" Liu said in a statement.
He continued, ""The magnitude of these problems suggests a larger systemic failure with consequences that have not only adversely affected homeowners and become a drain on regional economies, but also left shareholders vulnerable to substantial liabilities.""
The proposal requests that reports made to shareholders from banks' Boards of Directors should address specific issues such as:
* Policies and procedures to address potential financial incentives to foreclose when other options may be more consistent with the Company's long-term interests.
* Whether management has allocated a sufficient number of trained staff.
* The Company's compliance with applicable laws and regulations, and its own policies and procedures.
""Directors are elected by shareholders and as shareholders we intend to hold them accountable."" Liu added.