White House begins probe into mortgage servicers' operations
Regulators will meet Wednesday to hammer out the details on the White House's investigation into the foreclosure processes in mortgage servicing shops around the country. The investigation will go through the Federal Housing Administration. Department of Housing and Urban Development Secretary Shaun Donovan, Treasury Secretary Timothy Geithner and U.S. Attorney General Tom Perrelli will be at the discussion, White House Press Secretary Robert Gibbs told reporters. Bank of America (BAC), JPMorgan Chase (JPM), Ally Financial (GJM), Goldman Sachs' (GS) Litton Loan Servicing and PNC Financial (PNC) have each begun reviews of foreclosure affidavits signed en masse by employees without reviewing documentation or a notary present. All 50 state AGs and regulators opened investigations into the servicing shops. BofA, which suspended foreclosures nationwide said it will resubmit affidavits and resume foreclosures this coming Monday. Ally Financial said it resumes a foreclosure as it remediates a file. Both the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency began reviews of major servicing shops. When reporters asked Gibbs if the banks are resuming foreclosures too soon, he said the investigation seeks to determine compliance, and he reiterated that a national moratorium would be dangerous. "We have talked about, over the past week or so, the danger that we see in, though, halting the entire housing market and the danger that it would provide -- or potentially provide writ large -- and its effect on the economy," Gibbs said. Gibbs said if the banks have not met the requirements of the law, each faces fines from the government and potential legal action from homeowners. Fallout from the foreclosure issues, known as "robo-gate," has resulted in numerous protests and outrage from community activists. John Taylor, chief executive of the National Community Reinvestment Coalition, a consumer advocacy group, said he was heartened by the White House investigation but continued to press for a moratorium. "Foreclosures are the bane of our economic recovery, and we fail to see how a temporary national freeze will hurt the economy more than the foreclosures do," Taylor said. "Nobody wants to freeze foreclosures on abandoned homes. And a foreclosure freeze gives us all the chance to counsel homeowners, work with lenders and servicers to fix the servicing pipeline, and keep responsible homeowners in their homes." Other groups such as the PICO National Network and the National People's Action formed a coalition that is protesting at the American Bankers Association convention in Boston this week to demand a moratorium and more. "Specific demands from our coalition include a real foreclosure prevention effort that includes reducing principal for underwater homeowners, ending its current financing of payday and predatory lending; and resuming lending to small businesses and families in low and moderate income communities," the coalition said in a joint statement. But Rick Sharga, senior vice president of RealtyTrac, which monitors foreclosure filings across the country, told HousingWire in October a full-scale moratorium could actually cause more foreclosures. "An overall moratorium would also delay foreclosure processing on thousands of homes, delaying their entry onto the market beyond the critical spring selling season, adding to the glut of distressed inventory, probably causing further deterioration in home prices, and perhaps triggering yet more foreclosures," Sharga said. "And, at a minimum, extending the housing downturn by at least another two quarters." Write to Jon Prior.