By Mike Colpitts
U.S. banking regulators will review as many as 4.5 million mortgages to determine the gravity of foreclosure fraud at 14 bank servicing companies. The investigation will determine how many homeowners were damaged in the robo-signing scandal, according to Acting Comptroller of the Currency John Walsh.
Walsh made the announcement during a speech before a banking regulatory symposium in Washington, D.C. “This independent review sets out to identify borrowers who suffered financial injury as a result of errors, misrepresentations, or other deficiencies in the foreclosure process,” said Walsh.
“The scope of this review includes any mortgage serviced by these companies on a borrower’s primary residence that was in any stage of foreclosure between January 1, 2009 and December 31, 2010.”
Homeowners who went through foreclosure or are in the process will be able to request a review if they believe they suffered through an improper foreclosure of a primary residence. Rental properties will not be included in the review process. A nationwide advertising campaign coordinated with direct mailings to mortgage holders, who may have suffered through an illegal foreclosure will be started within a few weeks.
Fourteen bank servicing companies, including Bank of America, JP Morgan Chase, Wells Fargo and CitiBank are included in the review process, similar to an audit made during the robo scandal. A handful of employees hired by a division of Lender Processing Services signed affidavits under oath stating that they forged documents signifying they were executive officers for bank servicing companies, which allowed foreclosures to proceed without having direct proof of homeownership.
The massive review will include formal foreclosures and others that have been cancelled. An initial investigation by regulators looked into a sampling of just 200 loans at each of the 14 bank servicers, which wasn’t enough for regulators to determine the magnitude of the scandal.
“While robo-signing has become a shorthand for the broken process, these orders go far beyond just fixing robo-signing of documents,” Walsh told the gathering of bankers Monday. “They address the entire system of controls that must be in place to ensure that those practices don’t occur in the first place.”
A new series of national mortgage servicing standards is being developed as part of the program to correct the servicing industry for mortgage holders. “We have already begun this effort, and are working with the Fed, the FDIC, the FHFA, and the CFPB on new and comprehensive standards,” Walsh said.