WASHINGTON – The federal government on Wednesday ordered 16 of the nations largest mortgage lenders and servicers to reimburse homeowners who were improperly foreclosed upon.
Government regulators also directed the financial firms to hire auditors to determine how many homeowners could have avoided foreclosure in 2009 and 2010.
Citibank, Bank of America, JPMorgan Chase and Wells Fargo, the nation's four largest banks, were among the financial firms cited in the joint report by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency.
The Fed said it believed financial penalties were "appropriate" and that it planned to levy fines in the future. All three regulators said they would review the foreclosure audits. Under the agreements reached, the lenders and servicers have 45 days to hire an auditor and will "remediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies." There is no minimum or maximum dollar amount identified.
In the four years since the housing bust, about 5 million homes have been foreclosed upon. About 2.4 million primary mortgages were in foreclosure at the end of last year. Another 2 million were 90 days or more past due, putting them at serious risk of foreclosure.
Critics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders. House Democrats introduced legislation Wednesday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.
The other lenders and service providers cited by the agencies include: Ally Financial Inc., Aurora Bank, EverBank, HSBC, MetLife Bank, OneWest Bank, PNC, Sovereign Bank, SunTrust Banks, U.S. Bank, Lender Processing Services and MERSCORP. Citigroup said in a statement that it had "self-identified" needed changes in 2009 and that it has helped more than 1.1 million homeowners avoid foreclosure. "We are committed to working with our regulators to further strengthen our programs in these areas and meeting these new requirements," the company said.
Ally Financial, formerly known as GMAC, said it had not found "any instance where a homeowner was foreclosed upon without being in significant default."
Without specifically identifying instances of bad foreclosures, the government agencies noted in its report that the "deficiencies in foreclosure processing observed among these major servicers may have widespread consequences for the housing market and borrowers."
"This should have happened a long time ago," he said. "There are so many people who, if they had received a
meaningful modification, could have stayed in their homes."
Source – AP real Estate