7 major lenders ordered to review foreclosure procedures

Ariana Eunjung Cha, Washington Post

A top federal bank regulator said Thursday that he has directed seven of the nation’s largest lenders to review their foreclosure processes after learning about the widespread mishandling of homeowner evictions by the industry.

John Walsh, acting director of the Office of the Comptroller of the Currency, told lawmakers during a hearing on the financial regulatory overhaul enacted this summer that some lenders “clearly had deficiencies” in their system for foreclosures.

The banks contacted by regulators include J.P. Morgan Chase, which announced Wednesday that it was freezing 56,000 foreclosures after finding errors in its preparation of documents, according to OCC spokesman Kevin Mukri. Other lenders contacted include Bank of America, Citibank, HSBC, PNC Bank, U.S. Bank and Wells Fargo.

“We both want to see that they fix the processing problems but also to look to see whether there is specific harm [that has been caused] in individual cases,” Walsh said.

Revelations about widespread paperwork problems with foreclosures led Ally Financial, another major lender, to suspend evictions last week in 23 states where a court order is required to seize a property. Since then, the industry’s handling of foreclosures has come under close scrutiny from regulators, with attorneys general in several other states calling for Ally to halt foreclosures.

The paperwork problems range from potentially forged documents to bank employees who never read borrowers’ files before signing off on an eviction.

Read more here: http://www.washingtonpost.com/wp-dyn/content/article/2010/09/30/AR2010093006563.html