Government Requires Banks To Re-Examine Foreclosures From 2009 and 2010

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AJC.com has posted an article that discusses select mortgage companies were ordered by the government to overhaul their foreclosure practices. The order came after an investigation showed that the 14 mortgage companies were not doing enough to help struggling homeowners and were improperly documenting their paperwork.

The companies are required to hire consultants to re-evaluate foreclosures from 2009 and 2010 and will have to reimburse homeowners if discrepancies are found in the foreclosure’s processing.

The settlement between the servicers and federal banking regulators could help the U.S. Justice Department determine the size and scope of fines for the flawed practices, regulators said. The department is negotiating a global settlement that, if realized, would include fines from regulators as well as state officials.

“There will be civil money penalties. The issue is time and amount,” acting Comptroller of the Currency John Walsh told reporters in a conference call.

Some of the mortgage include big-name companies like Sun Trust Mortgage, Bank of America, JP Morgan Chase, Citigroup and Wells Fargo. Sun Trust reported in February of this year that it recognized problems with about 4,000 foreclosure cases and will do what it can to cooperate with the government’s new requirement. Sun Trust also says it has taken steps to amend documentation errors being called “robo-signing,” but stressed that there is not a problem with its internal servicing. Banks claim the reason most foreclosure errors occur is because they are overwhelmed by the sheer volume and are unable to process and document each one individually.

All of the affected mortgage servicers have agreed to stop executing “dual track foreclosures,” which is when the bank goes ahead and seized a home even in the midst of negotiation with the delinquent homeowners. JP Morgan said it may add as many as 3,000 new employees to double check their foreclosures, which will cost roughly $1.1 billion.

“The enforcement orders issued today are important, but they are only a first step in setting out a framework for these large institutions to remedy these deficiencies and to identify homeowners harmed as a result of servicer errors,” the FDIC said in a written statement.

Several other mortgage servicers are included in the government’s crackdown to improve internal processing methods, including:

the GMAC unit of Ally Financial Inc., Aurora Bank FSB, EverBank Financial Corp., HSBC Holdings Plc, OneWest, MetLife Inc., PNC Financial Services Group Inc., Sovereign Bank, and US Bancorp also signed consent agreements with regulators. Mortgage Electronic Registration Systems Inc., or MERS, of Reston, Va., and Lender Processing Services Inc. of Jacksonville, Fla.

So far it’s unclear how much this required reimbursement to homeowners will end up costing the banks, but it certainly sends a clear message to mortgage servicers: be honest and thorough regarding foreclosure practices.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us. We have also started handling bankruptcy cases.

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