Fed boss: Regulators looking into foreclosure mess - CBS News 8 - San Diego, CA News Station - KFMB Channel 8

Fed boss: Regulators looking into foreclosure mess

Posted: Updated:
Federal Reserve Chairman Ben Bernanke delivers an address at the Rhode Island Public Expenditures Council dinner in Providence, R.I., Monday night, Oct. 4, 2010. (AP Photo/Stephan Savoia) Federal Reserve Chairman Ben Bernanke delivers an address at the Rhode Island Public Expenditures Council dinner in Providence, R.I., Monday night, Oct. 4, 2010. (AP Photo/Stephan Savoia)

WASHINGTON (AP) — Federal banking regulators are examining whether mortgage companies cut corners on their own procedures when they moved to foreclose on people's homes, Federal Reserve Chairman Ben Bernanke said Monday.

Preliminary results of the in-depth review into the practices of the nation's largest mortgage companies are expected to be released next month, Bernanke said in remarks to a housing-finance conference in Arlington, Va.

"We are looking intensively at the firms' policies, procedures and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures," Bernanke said. "We take violation of proper procedures very seriously," he added.

The central bank's decision adds weight to federal and state investigations into whether banks used flawed documents to foreclosure on homeowners.

Attorneys general in all 50 states plus the District of Columbia are jointly investigating whether paperwork and legal procedures were handled properly. At the federal level, the Treasury Department's Office of the Comptroller of the Currency last month asked seven big banks to examine their foreclosure practices. The OCC and the Federal Deposit Insurance Corp. are also working with the Fed on its examination.

In addition to probing the banks handling of foreclosure documents, Fed staffers and other federal agencies are evaluating the potential effects of the foreclosure debacle on the real-estate market and on financial institutions, Bernanke said.

The Federal Reserve oversees bank holding companies — typically Wall Street's biggest banks — including Citigroup, Bank of America, JPMorgan Chase & Co., and Wells Fargo.

The inquiries come as Bank of America and Ally Financial Inc.'s GMAC Mortgage have resumed processing foreclosures, after halting them temporarily to review documents. Both lender face allegations that employees signed but didn't read foreclosure documents that may have contained errors. Other companies, including PNC Financial Services Inc. and JPMorgan, have halted tens of thousands of foreclosures after similar practices became public.

The federal agencies have a range of options at their disposal. They include issuing a "cease and desist" order requiring a company to stop engaging in a specific practice. They can impose fines on the companies. Agencies also can take less drastic actions, such as crafting a plan with the company to fix any problems.

Bernanke didn't provide details in his speech.

According to people familiar with the examination, the banking agencies are looking into whether companies had controls in place when foreclosure documents were signed, what procedures were in place to proper handle documents, and whether employees involved in the foreclosure process were adequately trained.

Dubious mortgage practices and lax lending standards were blamed for contributing to a housing bubble that eventually burst and thrust the economy from 2007-2009 into the worst recession since the 1930s. Many Americans took out home loans that they didn't understand and bought homes that they couldn't afford.

As a result, foreclosures have soared to record highs. It's one of the negative forces restraining the economy's ability to get back on sounder footing.

Now more than 20 percent of borrowers owe more than their home is worth, and an additional 33 percent have equity cushions of 10 percent or less, putting them at risk should house prices decline much further, Bernanke said.

"With housing markets still weak, high levels of mortgage distress may well persist for some time to come," Bernanke warned.

Copyright 2010 The Associated Press.

  • Local NewsMore>>

  • Kitten Rescue: San Diego man saves little treasure thrown in the trash

    Kitten Rescue: San Diego man saves little treasure thrown in the trash

    Thursday, June 21 2018 10:28 PM EDT2018-06-22 02:28:24 GMT

    A local trash collector found a tiny treasure – and a friend for life - on the job recently. Michael Cabrera was finishing up his shift one night when he found a kitten trapped in his truck. 

     

    A local trash collector found a tiny treasure – and a friend for life - on the job recently. Michael Cabrera was finishing up his shift one night when he found a kitten trapped in his truck. 

     
  • Separated Families: Abuse and threats directed at San Diego Border Patrol

    Separated Families: Abuse and threats directed at San Diego Border Patrol

    Thursday, June 21 2018 9:55 PM EDT2018-06-22 01:55:58 GMT

    San Diego Border Patrol agents, who are enforcing the Justice Department’s ‘zero tolerance policy,’ have become targets of abuse over social media as the immigration debate continues.

     

    San Diego Border Patrol agents, who are enforcing the Justice Department’s ‘zero tolerance policy,’ have become targets of abuse over social media as the immigration debate continues.

     
  • Mother and toddler son seriously injured in dog attack in La Mesa

    Mother and toddler son seriously injured in dog attack in La Mesa

    Thursday, June 21 2018 9:40 PM EDT2018-06-22 01:40:31 GMT

    Two dogs attacked a woman and her toddler son on an East County roadside Thursday, leaving them seriously injured, authorities said. The mother was pushing her 2-year-old son in a stroller on Waite Drive in La Mesa with her 8-year-old daughter walking alongside them when the pair of Rottweilers escaped from their nearby backyard kennel.

     

    Two dogs attacked a woman and her toddler son on an East County roadside Thursday, leaving them seriously injured, authorities said. The mother was pushing her 2-year-old son in a stroller on Waite Drive in La Mesa with her 8-year-old daughter walking alongside them when the pair of Rottweilers escaped from their nearby backyard kennel.

     
Powered by Frankly
All content © Copyright 2000 - 2018 Midwest Television, Inc. All Rights Reserved.
For more information on this site, please read our Privacy Policy, and Terms of Service, and Ad Choices.