Posted on Friday, November 19, 2010
NEW YORK — The trustees of New York City's government pension funds asked the directors of four major banks Tuesday to play a bigger role in policing company foreclosure practices.
City Comptroller John Liu said the retirement system owns about $1.77 billion worth of stock in Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. – an investment that could take a hit if the banks mishandle the mountains of bad home loans facing the industry.
Liu said the trustees have become concerned in recent months about a variety of reported problems in the way banks are handling foreclosures.
Saying the problems suggest "a larger systemic failure," Liu said the trustees have filed a shareholder proposal calling for the banks' directors to perform independent audits of internal controls over the foreclosure process and report back by Sept. 30.
Among other things, the review calls for an examination of whether the banks have created "perverse" incentives that lead to houses being seized even when a loan modification might be better for everyone involved.
"We raised concerns with the banks in July that misaligned incentives, inferior customer service and repeated requests for paperwork were undermining the loan modification process and leading to unnecessary foreclosures for homeowners," Liu said in a statement.
Bank of America said the resolution would be reviewed, along with other shareholder proposals, as part of the process leading up to the filing of the company's proxy statement in advance of its annual meeting. Spokespeople for the other three banks declined to comment.
Last month, several major banks temporarily halted most or all of their foreclosures nationwide after allegations that signatures were forged and documents weren't checked properly in thousands of cases.
Bank of America suspended foreclosures in all 50 states, while JP Morgan Chase halted them in 40 states. Lenders repossessed 909,000 homes through the first 10 months of the year and are on pace to take back more than 1 million homes this year.
DAVID B. CARUSO