Federal Housing Administration Commissioner David Stevens said early indications of a review into mortgage servicer operations has shown they are not meeting the loss mitigation needs of the Department of Housing and Urban Development. Stevens testified before the House Financial Services Committee Thursday on the recent foreclosure issues that have surfaced in many banks. Lenders such as Bank of America (BAC), JPMorgan Chase (JPM), Ally Financial (GJM) and Wells Fargo (WFC) are resubmitting affidavits allegedly signed by employees en masse without a review of the documentation as required by law in some states. Stevens said when he first entered office in 2008 significant reviews into servicers were not being done. So, in May, the FHA launched a review of several of its largest servicers that, combined, accounted for over 70% of HUD’s single-family servicing portfolio. “The early returns suggest that some servicers may be falling short – that in varying degrees many of the servicers under review may not have met HUD’s expectations in assisting borrowers through the loss mitigation process,” Stevens said. He added that FHA analysts have found some servicers even lack knowledge of the FHA loss mitigation process, necessary technology and enough experienced staff necessary to clear modification request backlogs. Ally Financial’s chief of mortgage operations said the bank is refiling the affidavits and bringing in outside counsel to review processes. Stevens said a review of one unnamed servicer yielded $700,000 in administrative fees. On the origination side, the FHA has withdrawn approval for over 1,500 lenders and imposed more than $4.2 million in penalties. As his office turns its attention to servicers, he warned that more action could be coming. “If you don’t operate ethically and transparently, we will not do business with you, and we will not hesitate to act,” Stevens said. Write to Jon Prior.