Seven Major Banks Told to Review Foreclosure Processes

October 1, 2010 No Comments »

lender foreclosure

The acting director of the Office of the Comptroller of the Currency has directed seven of the nation’s largest mortgage lenders to review their foreclosure processes amid reports of widespread mishandling of homeowner evictions.

John Walsh told lawmakers at a hearing on the financial regulatory overhaul that some lenders “clearly had deficiencies” in their foreclosure procedures.

The banks include Bank of America, Chase, Citibank, HSBC, PNC Bank, U.S. Bank, and Wells Fargo.

That means five out of six of the top mortgage lenders in the second quarter of 2010 have been told to potentially put the brakes on foreclosures and evictions until a review is conducted.

GMAC, the only bank in the top six that wasn’t explicitly told to review its processes, already halted evictions, cash-for-keys transactions, and lockouts in 23 states after the company warned it could need to take corrective action in connection with some foreclosures.

Chase followed suit a week later, and it’s becoming increasingly likely all major banks and mortgage lenders will get on board to avoid any controversy.

Walsh said the OCC wants to see that they fix the foreclosure processing problems, while also determining whether specific harm has been caused in individual cases.

Last week, the California AG called for Ally to halt foreclosures amid similar complaints, and today the Connecticut AG called for a state-wide foreclosure freeze until things get cleared up.

All the foreclosure issues stem out of paperwork issues (potential fraud), where bank employees who never read borrowers’ files signed off on evictions.

It’s semi-ironic, given many of these lenders may have also committed fraud when they put these borrowers in the homes to begin with.

Update: Bank of America has halted foreclosures, the others will likely do the same.

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