Housing agency head urges banks to help borrowers
NEW YORK |
NEW YORK (Reuters) - A top federal regulator urged the U.S. banking industry to help struggling borrowers as a way to regain public faith lost in the mortgage mess, even as more banks defended their foreclosure processes on Tuesday.
Federal Housing Administration Commissioner David Stevens told mortgage bankers meeting in Atlanta that the industry faces "an enormous trust deficit," and must take stronger steps to participate in government programs to help homeowners.
U.S. attorneys general for all 50 states are jointly investigating whether banks that foreclosed on thousands of bad loans failed to review documents properly or submitted false information to evict delinquent borrowers. They have been criticized for using "robo-signers" to process large numbers of foreclosure documents without full review.
HSBC Bank USA HBABU.UL HABA.L and Regions Financial Corp (RF.N), which are not among the largest U.S. mortgage servicers, said their internal reviews have not turned up any evidence of the type of faulty foreclosure processes that have sparked a nationwide furor and government investigations.
"We have looked. We don't have robo-signers, we don't believe we have that issue," said HSBC Bank's U.S. Chief Executive, Irene Dorner, during a panel discussion on Tuesday.
Similarly, Regions said during an earnings presentation that it uses a "solid and tested" process in repossessing homes CEO Grayson Hall said the bank only takes back property after "all other options have been exhausted." He said the Birmingham, Alabama-based lender handled some 260 home foreclosures a month.
Some of the largest mortgage servicers, including Bank of America (BAC.N), briefly halted evictions nationwide earlier this month while they reviewed thousands of foreclosure cases.
Dorner said the London-based HSBC did not expect to need to suspend foreclosures.
The FHA is expanding its review of five major servicers to others in the wake of the foreclosure flap, Stevens told reporters after addressing the meeting.
"There's a reflection in the media and a reflection in the industry that we aren't being held accountable enough," Stevens said.
Stevens said some bankers have simply refused to participate in government efforts designed to help borrowers and shore up the fragile housing market, such a new FHA program to help refinance some of the millions of borrowers who are underwater on their mortgage. A quarter of borrowers have a loan whose principal tops the home's value, sharply limiting their abilities to save money by refinancing, or moving.
Since the real estate market bust, which began in earnest in early 2007, consumer confidence has cratered, putting pressure on President Barack Obama to come up with a better plan for repairing the housing market.
Obama's fellow Democrats are expected to face the wrath of voters in November 2 congressional elections, with Republicans expected to gain control of the House of Representatives and perhaps even the Senate.
Lawsuits have already begun to trickle in and banks may also face fines or be forced to repurchase faulty loans, which would hurt profits.
Some bankers are attempting to quiet the outcry by publicly supporting greater regulatory oversight of the foreclosure process. HSBC's Dorner, for example, told audience members that she welcomed a coming visit from the bank's U.S. regulator to review its foreclosure processes.
"This is something that needs to be aired," she said. "This issue will turn into a political football."
Royal Bank of Canada (RY.TO) Chief Executive Officer Gordon Nixon went a step further on Tuesday, calling for "significant reform" of the U.S. mortgage system.
"The residential mortgage structure in the United States is at the heart of this (economic recovery) issue. It is still problematic and I think it needs significant structural reform," he said in response to a question during a panel discussion.
(Reporting by Maria Aspan in New York; additional reporting by Joe Rauch in Charlotte and Al Yoon in Atlanta; Editing by Jackie Frank)
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