An article today in the Wall Street Journal reveals that bank regulators knew as long ago as 1998 that there were errors in foreclosures and yet took no steps to act.
I have actually been writing about foreclosure problems for the better part of this year. Now we hear from the regulators themselves that they basically ignored the problems that had been brought to their attention.
A 2007 study by Kathleen Porter, a University of Iowa law professor, found that servicers often tried to seize people's homes improperly, adding new fees when borrowers wanted to try saving them. She found that many servicers "lack the required documentation necessary to establish a valid debt."
Her findings prompted a hearing by the Senate Judiciary Committee held in May 2008. Afterward, Sen. Charles E. Schumer (D-N.Y.), who chaired the hearing, concluded that mortgage servicers have "failed to keep even the most basic records to justify their claim."
Some may remember this:
Then in 2008, the FTC reached a $28 million settlement with EMC Mortgage, later bought by J.P. Morgan Chase, to resolve complaints about defrauding borrowers and failing to properly keep track of mortgage documents.
This was a warning sign that was totall ignored at the time.
While acknowledging they did not police foreclosure practices, OCC officials defended their oversight of banks' mortgage operations. They cite multiple cases brought against loan servicers in recent years. In an instance where the agency caught a manager allowing legal documents to be improperly signed, the OCC fined her $5,000 and told her not to do it again.
Another warning sign that was ignored.
While hindsight is always 20/20 we must wonder, given the fact that while problems mounted and information was available, the regulators did nothing, what will change?
We can only hope that given the amount of information that has come to light and the way in which the media has kept this in the front pages that oversight will be far better now.
The article states that they are going to focus now on modifications. We can only hope that they focus harder on the modifications than they did on the foreclosure mess we find our selves in now.
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