Posted on Thursday, October 21, 2010
JIM LEHRER: A federal task force met today in Washington to sort through the housing foreclosure mess, much of it caused by reports of major paperwork problems. More than 2.5 million American homes are currently in foreclosure.
The secretary for housing and urban development, Shaun Donovan, briefed reporters after today's meeting. And he spoke to us a short while ago from the head headquarters -- HUD headquarters in Washington. Mr. Secretary, welcome.
SHAUN DONOVAN, Housing and Urban Development Secretary: It's great to be with you.
JIM LEHRER: How serious is the paperwork irregularities problem?
SHAUN DONOVAN: Well, first of all, any time somebody loses their home as a result of a paperwork error, that's a serious problem. It's one we take very seriously in the administration. And we are working together, and, in fact, convened today 10 different agencies from across the federal government to look at not just the paperwork issues, but the broader range of issues that have been raised about -- about servicing.
And we do have concerns that we are seeing not just mistakes on paperwork, but issues around servicers not doing what they should be doing to help keep people in their homes. And -- and, just to be clear...
JIM LEHRER: Sure.
SHAUN DONOVAN: ... it's one thing to say that, at the very end of the process, there's a paperwork error. It is unlikely at -- many times, at that point, the home may be vacant or a person may be so deep in arrears, that it's going to be very difficult at that point in the process to keep them in their home.
We want to make sure we're working with servicers earlier in the process, and that they're fixing any problems in the process further upstream, where you actually have a more significant chance of keeping somebody in their home. So, we're focused not just on the paperwork issues, but a broader set of issues around the servicing process.
JIM LEHRER: But the paperwork problem specifically, how -- what's the extent of it. How widespread is it?
SHAUN DONOVAN: Well, that's exactly why we have convened this task force and we're looking extensively at this issue in FHA, in other forms of lending.
And we're going to move as quickly as possible to try to resolve these concerns and get a sense of the scale of them. That's why we're doing these reviews. And, to be clear, we're going to hold people accountable. We're going to hold the institutions accountable for any mistakes that we find.
It's also why we're coordinating closely with the state attorneys general. Many of these processes around foreclosure are under state law. The processes vary from state to state. And, so, we're coordinating closely with them to make sure that we have the authorities to enforce where we find those problems.
JIM LEHRER: But, as we speak now, you do not know how widespread the problem is, correct? Is that correct to stay?
SHAUN DONOVAN: What I would say is that we are investigating as quickly and as comprehensively as possible how pervasive these issues are. Obviously, there are problems here, because servicers have acknowledged it and have put moratoria in place to be able to correct those problems.
And we support the fact that they have stopped those processes to review them and fix them. And any other servicer that finds these issues should be doing that.
What I would also say, though, is, we have found, based on the reviews so far, concerns with the processes, not just on paperwork, but on earlier in the process, where servicers should be working under FHA requirements to keep people in their home.
What I would also say, though, is, we have not found those issues across the board. And so this is really an issue with particular institutions. From the evidence we have so far, this is not a systemic problem that cuts across all mortgages or all servicers. And that, I think, is important.
JIM LEHRER: So, you -- so, you have no idea yet how many mortgages have been poorly serviced or improperly executed?
SHAUN DONOVAN: That's exactly why we have undertaken this review, to try and get a comprehensive picture.
We have specific examples of it. We don't yet have a comprehensive picture of it. That's why the president asked us to convene this comprehensive review, to work together closely with other agencies. And that was what the meeting we had today was about with these 10 agencies.
It's part of an ongoing process to coordinate, get to the bottom of this as quickly as possible. And our expectation is, based on the importance of this and the attention we're focused on it, that we should have results from those reviews by the end of November or early December.
JIM LEHRER: What are some of the most grievous mistakes that you all have come across thus far?
SHAUN DONOVAN: Well, look, I think the most important thing that we can do here, not just for homeowners, but also for the taxpayers, because, after all, FHA is a public agency that ensures these mortgages, we can ensure that we're getting to homeowners as soon as possible in the process.
It's not acceptable, for example, that, even though we require them to, a servicer might never pick up the phone and reach out to a borrower to find out what problems there are, why they're late on their payment, or might not provide them with a modification, even if they're required to do that.
So, those are the kind of things that we're particularly concerned about and focused on in the review that we're doing with FHA around these mortgages.
JIM LEHRER: Is it possible that this is going to end up with people going to jail?
SHAUN DONOVAN: We are coordinating with law enforcement agencies. Department of Justice is engaged with the Financial Fraud Task Force. And we will be and -- and they are looking at specifically whether there are criminal issues here.
But I want to be clear. That is a narrow set of the issues, if there is willful or fraudulent misconduct. We are looking, more broadly, HUD and most of the agencies involved, more broadly, at a set of issues around the servicing process itself, which are not criminal issues.
JIM LEHRER: So, thus far, you have not -- or I will ask you just directly. Thus far, have you come across, you personally, as the housing secretary of the United States, read about or heard about internally from your own people examples of things that just made you angry, that somebody really, really was hurt because somebody did a very poor job and was careless, or whether it was intentional or otherwise, it's really something that needs to be fixed, and fixed fast?
SHAUN DONOVAN: Look, we have servicers that have acknowledged that they foreclosed on people's homes without the clear authority and legal ability to do that. That is a serious problem.
JIM LEHRER: Sure.
SHAUN DONOVAN: It is the reason why, I think, the American people are deeply disturbed about this. And I think the behavior -- that behavior is shameful.
What we have also begun to find through our reviews -- those reviews are not completed yet, and so I'm not prepared to talk in detail about the specifics of what we have found. But we have found that there are servicers who have not been, we believe, doing what they are required to do, what they should be doing to keep people in their homes, and reaching out to them early in the process to see if they can keep somebody in a home who can stay in that home and can afford to stay in that home.
That, to me, is a serious problem as well.
JIM LEHRER: Now, when you say -- when you say servicers, of course, you mean banks, right, primarily?
SHAUN DONOVAN: Absolutely.
JIM LEHRER: Are agents of the federal government going in and looking at the records of these banks to see what did happen and didn't happen? These are full-fledged, full-bore investigations that are going to be done?
SHAUN DONOVAN: There is a coordinated set of investigations and reviews that is happening today that includes going loan by loan and file by file in the banks to find what has been done and to get to the bottom of this as quickly as possible.
Let's -- let's be clear. The sooner we understand these issues, the sooner that we can resolve what's happened here, that we can take appropriate enforcement actions to hold these institutions accountable, to fix the problems, and to make sure that we do right by the homeowners, the sooner not only those homeowners can be confident.
It also means that other homeowners can be confident. It also means that our markets more broadly can be confident that the housing recovery we have begun to see is a stable one that will continue.
So, everyone's interest here is in getting to the bottom of this as quickly as possible and resolving it.
JIM LEHRER: All right. Mr. Secretary, thank you very much.
SHAUN DONOVAN: Thank you.
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