Big Banks Face Tough Federal and State Investigations into Mortgage Practices
The top five mortgage servicers in the United States remain locked in tense debates with the Department of Justice, federal bank regulators and the attorneys-general of each state surrounding foreclosure practices that took place in the height of the housing crisis.
In 2010, news reports alleged that these banks, Bank of America, JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc., used “robo-signers” on foreclosure documents in violation of consumer laws in many states. In fact, all 50 states moved forward to enter into a settlement that would require changes to foreclosure servicing.
These negotiations yielded a revised agreement in May that includes a relief fund to adjust mortgages and provide for mediation of future cases. While no figure has been agreed upon, the banks have so far offered figures below the $20 billion amount floated by regulators.
Apart from these negotiations, U.S. bank regulators issued enforcement orders in April to 14 financial institutions to revamp their mortgage servicing practices. These orders have required banks to hire an outside consultant to assess their procedures from foreclosures that took place in 2009 and 2010 and suggest changes within 60 days.
The initial mortgages are not the only products being scrutinized by regulators. The U.S. Securities and Exchange Commission is investigating the marketing tactics these banks used to sell bundles of mortgages to investors. Click here to read the press release on their settlement with Wachovia in April 2011.
For more information:
Click here to read the Federal Reserve’s comment on the April enforcement action.
Click here to read the FDIC’s response to that action.