Federal regulators seek to fine eight more firms in foreclosure inquiry
Federal regulators are poised to crack down on eight financial firms that are not part of the recent government settlement over home foreclosure practices involving sloppy, inaccurate, or forged documents.
Last week, a senior Federal Reserve official recommended fines for these additional financial institutions, raising questions about how deep foreclosure problems run through the banking industry.
In addition, judges, lawyers and advocates for homeowners say that people are still losing their homes despite improper documentation and other flaws in the foreclosure process often involving these firms.
The eight firms cited by the Federal Reserve — HSBC’s U.S. bank division, SunTrust Bank, MetLife, U.S. Bancorp, PNC Financial Services, EverBank, OneWest and Goldman Sachs — should be fined for “unsafe and unsound practices in their loan servicing and foreclosure processing,” Suzanne G. Killian, a senior associate director of the Federal Reserve’s Division of Consumer and Community Affairs, told lawmakers last month in a House Oversight Committee hearing in New York.
The recommendation is the culmination of an investigation begun nearly two years ago over accusations that bank representatives were churning through hundreds of documents a day in foreclosure proceedings without reviewing them for accuracy, a practice known as robo-signing.
Some see the Fed’s recommendation as an attempt to push these firms to agree to the terms of the broader mortgage settlement involving the state attorneys general and federal officials. During those settlement talks, federal regulators reached out to other institutions in hopes that they would also agree to the terms, according to people briefed on the negotiations.
Much of the foreclosure attention has focused on the five largest mortgage servicers — Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial — which agreed to the $25 billion settlement this year without admitting wrongdoing.
Despite the pledges of the giant servicers to amend their practices, there are signs that foreclosure cases with other companies remain problematic. An examination of dozens of court cases by The New York Times found questionable documents involving some of the eight institutions cited by the Fed.
Arthur M. Schack, a New York state Supreme Court judge in Brooklyn, has cracked down on fraudulent documentation and said he was concerned that foreclosures moving through the courts continued to be flawed. Even after mortgage servicers have been excoriated by a judge in one state, they still use similar documents in other cases in other states, according to the examination.