January 26, 2011 / 6:42 PM / in 7 years

Top congressional cop may probe mortgage servicers

WASHINGTON (Reuters) - A top congressional cop said on Wednesday he would consider investigating U.S. mortgage servicers, which have been accused of shoddy home foreclosure practices.

If the House Oversight Committee decides to take on this probe, it will add yet another layer of pressure on top servicers such as Citigroup Inc, Wells Fargo & Co and Bank of America Corp.

The nation’s 50 state attorneys general, the Securities and Exchange Commission, bank regulators and the Justice Department are among those probing the handling by banks of mortgage-related paperwork and foreclosure procedures.

At the House Oversight Committee’s first hearing of the year, lawmakers said more had to be done. Democratic Representatives Dennis Kucinich and Elijah Cummings asked the Republican committee Chairman Darrell Issa to haul in servicers such as JPMorgan Chase & Co.

Issa, who became chairman when Republicans took control of the House of Representatives in January, said he would consider the request.

The banks have been accused of taking illegal shortcuts in some foreclosure proceedings, such as using “robo-signers” to sign hundreds of unread documents a day and advancing foreclosures without proof they held mortgages.

A Treasury-led task force, which includes financial regulators, is expected to soon reveal findings from a probe into banks’ foreclosure practices.

John Walsh, acting head of the Office of the Comptroller of the Currency, said last week that regulators were meeting with banks and determining if penalties should be pursued. He said that work would be finished in February.


At the hearing, a top Treasury Department official insisted the Obama administration would forge ahead with its mortgage modification program, even though the foreclosure prevention effort has been heavily criticized for wasting taxpayer money and not doing enough to keep people in their homes.

Lawmakers from both parties ripped into the program, known as the Home Affordable Modification Program, which relies on the government’s $700 billion financial bailout fund.

Republican Representative Jim Jordan called HAMP a colossal failure. “At some point we have to say enough is enough. Let’s end this program,” Jordan said.

But Assistant Treasury Secretary Timothy Massad told the hearing that shutting down the program would be the wrong thing to do. “It’s still helping a lot of people,” Massad said. “Turning it back to the servicers would not be constructive at this time.”

The administration had initially predicted the program would help 3 million to 4 million homeowners stay in their homes. But so far, just more than 500,000 borrowers have received a permanent loan modification under the program.

A bailout watchdog said in a report released on Tuesday that the program has been beset by problems from the outset and, despite frequent retooling, continues to fall dramatically short of any meaningful standard of success.

Reporting by Rachelle Younglai; editing by Andre Grenon and Maureen Bavdek

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