The industry's foreclosure paperwork problems were the focus on Capitol Hill Tuesday. Sen. Chris Dodd (D-Connecticut) called a hearing of the Senate Banking Committee to discuss the so-called robo-signing issue, which he called just the tip of the iceberg.
Executives from several major banks Ã¢â‚¬" including ""Bank of America"":http://www.bankofamerica.com and ""JPMorgan Chase"":http://www.jpmorganchase.com Ã¢â‚¬" were present to defend the validity of their foreclosure actions and detail changes that have been implemented to strengthen the integrity of the process. But lawmakers were hardnosed and unforgiving in their accusations.
""Sen. Sherrod Brown"":http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=4bae807c-9b6a-40a5-921d-f2153b7e8a29 (D-Ohio) said, ""The predatory practices of the mortgage servicing industry are remarkably similar to the predatory practices that led to the subprime crisis. The biggest mortgage servicers have poorly maintained, lost, or forged documentation. They ignored the interests of homeowners in exchange for outsized profits. Indifference, foreclosed homes, and broken neighborhoods shouldn't be a formula for record profits.""
Sen. Dodd called the mortgage servicing model ""broken."" He said, ""More than a month ago, the robo-signing scandal hit the press. Many in the industry were too quick to call these problems Ã¢â‚¬Ëœtechnical.' You can argue that it is not yet a systemic crisis, but no one can argue that we are not in the middle of a crisis.""
""Barbara Desoer"":http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=0a4db4b3-b131-4764-8247-c665b9978e44, president of Bank of America Home Loans, stressed to the Senate Committee members that deficiencies in foreclosure paperwork have not led her organization to wrongfully seize anyone's home.
""We have reached a crossroads between loan modification efforts and the reality of foreclosure,"" Desoer said. ""We're reaching a peak where some customers will be dealing[COLUMN_BREAK]
with the reality that despite the myriad of programs and our best efforts, foreclosure is unavoidable.""
Desoer did acknowledge that BofA and its staff have an obligation to protect the integrity of foreclosure proceedings. ""When and where that has not happened, we accept responsibility for it, and we deeply regret it,"" she said.
""David Lowman"":http://banking.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=32e5c5a7-4e5e-4579-bb0e-2786eab635b8, chief executive of JPMorgan's Chase Home Lending, emphasized that not only do foreclosures bring hardship to borrowers and depress property values, but they also inevitably result in severe losses for lenders and investors.
Regarding flaws in his own company's foreclosure affidavit procedures, Lowman said, ""JPMorgan Chase is committed to ensuring that all borrowers are treated fairly. We regret the errors that we have discovered in our processes, and we have worked hard to correct these processes.""
The hearing was not without incident. According to ""Ronald Orol of MarketWatch"":http://www.marketwatch.com/story/dodd-robo-signing-the-tip-of-the-iceberg-2010-11-16, Lowman's testimony was interrupted by Bruce Marks, CEO of the nonprofit homeowner advocacy group ""Neighborhood Assistance Corporation of America"":https://www.naca.com.
""Let the homeowners speak. Homeowners tell your story,"" Marks yelled as he was escorted by a police officer from the committee room, Orol reported, noting that the hearing room and a nearby overflow room were filled with some 150 distressed borrowers whose home loans are with Chase.
The ""Congressional Oversight Panel"":http://cop.senate.gov released its own report on the foreclosure documentation scandal Tuesday. In it panel members warned, ""Ã¢â‚¬ËœRobo-signing' may have concealed deeper problems in the mortgage market that could potentially threaten financial stability and undermine foreclosure prevention efforts.""
In the best-case scenario, concerns about mortgage documentation irregularities may prove overblown, according to the ""panel's 127-page report"":http://cop.senate.gov/documents/cop-111610-report.pdf. But in the worst-case scenario, the robo-signing of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure, namely loan ownership, the panel said.
The House Financial Services Committee is scheduled to ""hold a separate hearing"":http://financialservices.house.gov/Hearings/hearingDetails.aspx?NewsID=1376 on the robo-signing controversy and foreclosure servicing issues Thursday.