Legal Ethics

House Speaker Pelosi Calls for Federal Probe of How Banks Handle Mortgage Foreclosures

A group of Democratic lawmakers from California headed by House Speaker Nancy Pelosi is calling for a federal investigation of irregularities in mortgage foreclosure cases, in the wake of increasing reports of “robo-signatures” and other questionable practices by a number of major mortgage servicers.

Additionally, prior to filing suit, banks “have repeatedly misled and obstructed homeowners from receiving the help Congress and the administration have sought to provide,” the Congress members wrote in a letter yesterday (PDF) to U.S. Attorney General Eric Holder, Federal Reserve Board Chairman Ben Bernanke and U.S. Comptroller John Dugan, reports the Washington Post.

The letter apparently refers to recent news that thousands of foreclosure actions in multiple states could be based on defective documents provided to courts on behalf of at least three banks, in a system apparently so flawed that, on at least a couple of occasions, banks have reportedly foreclosed on homes on which there was, in fact, no mortgage.

However, the letter seeks a more sweeping probe, saying that “(r)ecent reports that Ally Financial (formerly GMAC), JP Morgan and Bank of America may have approved thousands of unwarranted foreclosures only amplify our concerns that systemic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures.”

After three years of the worst housing crisis in decades, the letter concludes, “It is time that banks are held accountable for their practices that have left too many homeowners without real help.”

Meanwhile, news that at least three major lenders could have filed thousands of foreclosure cases without proper documentation is expected to fuel further litigation on behalf of struggling homeowners, according to the Wall Street Journal (sub. req.).

Although it remains to be seen whether such litigation would achieve any real relief for many homeowners, it is widely expected to slow down further an already-overburdened court system.

And a document-signer for a fourth lender, Citigroup Inc. unit Citi Residential Mortgage, told Florida attorney Gloria Einstein in a July deposition that he signed between 2,000 and 5,000 mortgage documents daily with an electronic “e-signature” stamp, the newspaper says. However, a Citigroup spokesman says it isn’t undertaking any investigation into its practices, beyond what it already does on a standard basis.

Related coverage: “Ohio Official Asks Federal Prosecutor to Review Chase Mortgage Foreclosures” “Shapiro & Fishman Squares Off with Fla. AG, Calls Law Firm Foreclosure Probe an Abuse of Gov’t Power” “JPMorgan Chase Freezes Foreclosures in 56,000 Cases; Will More Banks Follow Suit?”

New York Times: “Bank of America to Freeze Foreclosure Cases”

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