Supervisors directed banks’ mortgage misconduct, HUD report says

Employees at major banks who churned out fraudulent foreclosure documents, forged signatures, made up fake job titles and falsely notarized paperwork often did so at the behest of their superiors, according to a federal investigation released Tuesday.

It’s well documented that the nation’s biggest banks routinely “robo-signed” legal papers to keep up with the wave of foreclosures brought on by the housing bust. But the new report from the inspector general of the Department of Housing and Urban Development reveals that those shoddy practices often came at the direction of managers at the banks, and that employees in some cases were judged by how fast they could get new foreclosure filings out the door.

Gallery

 The Standard & Poor’s/Case-Shiller home price index offers a monthly assessment of how home prices are faring from city to city. In the most recent report, only two cities saw an increase in prices from the previous month.

Gallery

 As families are forced out of their homes after falling behind on mortgage payments, a nationwide glut of foreclosed homes is expected to depress U.S. housing values for years.

“I believe the reports we just released will leave the reader asking one question: How could so many people have participated in this misconduct?” David Montoya, HUD inspector general, said in a statement. “The answer: simple greed.”

HUD investigators launched their inquiries soon after news of the banks’ practices caused a national uproar in late 2010, and government officials used their findings as they negotiated a recent landmark $25 billion settlement with the banks.

HUD reviewed foreclosure practices at all five banks involved in the recent settlement — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. They issued subpoenas, pored over personnel files, conducted interviews with scores of employees and examined the quality control measures — or lack thereof — at the banks’ mortgage servicing units.

Repeatedly, according to the report, investigators were hampered by poor record-keeping at the banks, sluggish responses to requests for documents and an unwillingness to make employees available for interviews or to allow them to answer detailed questions at the virtual foreclosure factories where they worked.

Nevertheless, investigators pieced together a picture of a deeply flawed system riddled with errors, where employees often had little or no training, where managers encouraged wrongdoing and where haste trumped all else.

At Bank of America, for instance, performance reviews revealed that employees often were judged based on how quickly they worked and how many files they churned through, the HUD report stated. One manager noted in an employee review: “Your stats so far this year are as follows: Affidavits 46.97 per hour (standard is 49 per hour), Assignments 54.74 per hour (standard is 51 per hour) and DocEx 49.67 per hour (standard is 46 per hour).”

At Chase, operations supervisors “routinely signed foreclosure documents, including affidavits, certifying that they had personal knowledge of the facts when they did not,” nor did those supervisors bother to verify the accuracy of the documents they signed, according to the report.

In addition, the supervisors said in interviews with HUD officials that they often signed affidavits as an “assistant secretary” or “vice president” of Chase, when those were not their official titles. Rather, they were given those titles by Chase for the sole purpose of allowing them to sign legal documents. The titles came with no other duties or authority, the report said.