Posted on Thursday, October 21, 2010
WASHINGTON — Administration officials renewed efforts on Wednesday to ease concerns about the integrity of the foreclosure process, saying that no evidence had emerged so far of any problems that threatened the health of the financial system.
Shaun Donovan, secretary of housing and urban development, said Wednesday that the government would soon enforce the requirements that some mortgage companies modify loans.
Several federal agencies are investigating reports that mortgage companies violated legal requirements in seizing homes, for example, by forging signatures on legal documents.
“We have not found any evidence at this point of systemic issues in the underlying legal documents,” said Shaun Donovan, secretary of housing and urban development. He added that the reviews remained at an early stage and that the government hoped to complete the work this year.
Mr. Donovan, speaking at a White House news conference, also sought to shift the focus of public concerns about the foreclosure process. He said the administration was more interested in making sure that mortgage companies helped homeowners avoid foreclosure by modifying or replacing unaffordable loans.
A government investigation started in May has found that some large mortgage companies are not offering borrowers a fair chance to modify loans, Mr. Donovan said. The companies are required to offer the modifications because the loans in question are guaranteed by the Federal Housing Administration. Mr. Donovan said the government would act shortly to enforce compliance.
“We are focused on the process early, to keep people in their homes, rather than focusing late, when it is much less likely that people will be able to stay in their homes,” he said.
On Wednesday, the White House convened officials from 10 federal agencies to review and coordinate a growing list of investigations into foreclosure-related issues.
A task force led by the Justice Department is exploring whether any homes were taken through intentional fraud, which could lead to criminal charges. Banking regulators are reviewing the way large mortgage companies handle foreclosures.
The Securities and Exchange Commission is also examining how mortgage securities were sold. Mr. Donovan said that the goal was to ensure that companies followed the law.
“Banks expect homeowners to meet their obligations,” he said. “American homeowners should have the same expectation that banks and mortgage servicers meet all of their obligations.”
Foreclosures have piled up steadily for several years now while the interest of the public and the government has waxed and waned. The current issue dates to mid-September, when GMAC, a major mortgage company, suspended home seizures in 23 states after accusations that it had not taken basic steps to ensure that it was seizing the right homes.
Similar accusations led several other banks to suspend foreclosures as well, though some have since said that they are confident that they are following the law and that they intend to resume seizing homes.
Judges say they are still considering how to deal with the cases that are uncontested. In most courts, that is the vast majority of foreclosures.
“People don’t understand why we don’t become more proactive in conducting our own investigations,” said Peter D. Blanc, chief justice for the 15th Judicial Circuit of Florida. “Why aren’t we going behind the pleadings to see if there’s fraud? But people on the other side say we’re reacting too much to news stories. We struggle to try and maintain a level playing field.”
Jonathan Lippman, the chief judge of New York State, on Wednesday went far beyond any other court system’s response after he put in place a new requirement for lawyers bringing foreclosure cases: a signed affidavit that they have verified the accuracy of the documents. The lawyer will have to name the person at the lender who provided confirmation, as well as certify his own inspection of the papers.
“The large lenders are saying they’re not sure about the viability or accuracy of the proceedings they’re bringing,” said Judge Lippman. “We started to think the integrity and the credibility of the court process was at stake.”
He said he knew of no similar requirement instituted in any previous court for any reason. There are about 80,000 foreclosure cases pending in New York courts. All will need the new affidavits. “I don’t think there will be any delays or gumming up the works, but if there is, so be it,” Judge Lippman said.
Fidelity National Financial, the country’s largest title insurer, said Wednesday that it had its own method of making sure foreclosures were done properly: it would be requiring all lenders to provide warranties that the eviction complied with state law.
Title insurers have been trying to gauge the risk associated with faulty foreclosures re-entering the real estate market. While the insurers minimized the likelihood of former owners dispossessing new buyers, a little indemnification is clearly lessening their worries. Fidelity National’s stock, which had fallen about 10 percent since the foreclosure furor started, rose modestly on Wednesday.
By BINYAMIN APPELBAUM David Streitfeld contributed reporting from San Francisco.