Bernanke: Federal banking agencies reviewing mortgage servicing operations
Federal banking agencies are conducting an in-depth review of practices at the nation's largest mortgage servicing operations as a result of reported irregularities in foreclosure practices, Federal Reserve Chairman Ben Bernanke said Monday. Preliminary results are expected next month. "We are looking intensively at the firms' policies, procedures and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures, the Fed chairman said. Bernanke spoke at a two-day joint housing and mortgage symposium sponsored by the Federal Reserve System and the Federal Deposit Insurance Corp. that began Monday morning in Washington, D.C. "Federal Reserve staff members and their counterparts at other federal agencies are evaluating the potential effects of these problems on the real estate market and financial institutions." Homeownership, Bernanke said, has always been important to Americans, and government policies have promoted it. But homeownership "is only good for families and communities if it can be sustained. Home purchases that are very highly leveraged or unaffordable subject the borrower and lender to a great deal of risk." Dubious underwriting and questionable mortgage products earlier this decade contributed to the current foreclosure crisis and to problems in the broader financial markets, he said. Some 20% of borrowers are now underwater on their mortgages, and another 33% have equity cushions of less than 10%, a risk if housing prices continue to slide. The regional Federal Reserve banks have been working to help homeowners via community events, online resource centers and policy and data research, Bernanke said. "The Fed is particularly well suited to such an effort," he said. "Our community development experts are working on the ground to promote fair and equal access to banking services and improve communities." Write to Kerry Curry.