Lawmakers Look at Problems in Home Loan Servicing Practices

The US Senate Banking Committee is set to hold a hearing this week to look at the problems that hound the mortgage service industry. Legislators intend to probe on allegations that home loan lenders used ‘robo-signers’ in signing numerous foreclosure documents in as fast as a day without due and necessary legal review.

The committee has summoned several regulators from the two industry watchdogs. Chairman Sheila Bair of the US Federal Deposit Insurance Corp and Governor Daniel Tarullo of the US Federal Reserve have been asked to appear in the hearing to give updates on their own investigations.

The regulators are expected to be put in hot seats, because several lawmakers are suspicious and disappointed about how they oversee industry foreclosures. The two watchdog representatives, for their part, are expected to discuss how the documentation problems serve as threats to mortgage lending and to the housing market recovery as a whole.

Federal bank regulators, together with 50 state attorneys general, are investigating JP Morgan, Bank of America, and several other mortgage providers amid numerous charges and complaints from their customers about the supposedly mishandling of foreclosure procedures. Most of the lenders temporarily stopped their foreclosure proceedings to re-assess and review their foreclosure and documentation practices. However, most of them have also resumed foreclosures, though in a slower pace.

Regulators have earned flaks from countless critics for allegedly not noticing those widespread industry flaws. Such criticisms and the supposed anomalies have instantly reignited public anger towards banks, which have mostly received billions of dollars in financial aid during the height of the recent financial crisis.

Representatives from government-sponsored mortgage finance firms Fannie Mae and Freddie Mac were also invited to grace the hearing. Officials from the two companies are expected to justify their decision to resume halted sales of foreclosed homes.

Senator Robert Menendez, the chairman of the banking panel’s housing subcommittee, gave a comment to the press regarding the upcoming hearing. Senator Menendez said he expects to hear explanations on how regulators have appropriately corrected their policies that allowed foreclosures to proceed without the necessary due processes.

Meanwhile, aside from resuming foreclosure proceedings, JP Morgan and Bank of America have announced plans to settle charges filed by state attorneys in different states. The lenders revealed that settlement deals remain elusive, but they would be willing to wait several months for positive development.

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