Bernanke says U.S. regulators reviewing foreclosures
Monday, October 25, 2010; 3:41 PM
Oct. 25 (Bloomberg) -- U.S. banking regulators are examining mortgage lenders' procedures to see if they are improperly foreclosing on homes, Federal Reserve Chairman Ben S. Bernanke said.
"We are looking intensively at the firms' policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures," Bernanke said today at a housing conference in Arlington, Virginia.
Ally Financial's GMAC Mortgage unit, JPMorgan Chase & Co., and Bank of America Corp. are among loan servicers that temporarily halted foreclosures while the companies review paperwork. Court documents have showed that employees might have submitted affidavits without confirming their accuracy, a practice that state officials say could amount to fraud.
"We take violations of proper procedures seriously," Bernanke said at the conference on mortgages and housing finance, hosted by the Fed and Federal Deposit Insurance Corp.
Bernanke didn't comment on the outlook for the economy or monetary policy, eight days before the Fed meets to decide on what economists and investors expect will be a plan to boost growth by restarting large-scale securities purchases. After discussing foreclosures, he devoted much of his remarks to the Fed's housing-market efforts, such as studies, conferences and events serving troubled borrowers.
"More than 20 percent of borrowers owe more than their home is worth, and an additional 33 percent have equity cushions of 10 percent or less, putting them at risk should house prices decline much further," Bernanke said. "With housing markets still weak, high levels of mortgage distress may well persist for some time to come."
Sales of existing homes rose in September by the most on record as cheaper borrowing costs help stabilize an industry that's battling the headwinds of foreclosures and unemployment, an industry report showed today.
Purchases increased 10 percent to a 4.53 million annual rate from 4.12 million in August, the National Association of Realtors said today in Washington. Economists forecast sales would rise to a 4.3 million pace, according to the median projection in a Bloomberg News survey. The median price fell 2.4 percent from a year earlier.
Foreclosures are mounting as out-of-work Americans fail to meet monthly payments while growing numbers of homeowners, seeing their home prices slide to less than their mortgage values, also default.
Unemployment forecast to exceed 9 percent through 2011 is another reason why any recovery in housing may take years, even with 30-year mortgage rates near record lows.
Regulators are likely to discover more problems related to loan servicing by some of the biggest banks as they probe claims that documents were mishandled, Federal Deposit Insurance Corp. Chairman Sheila Bair said at the conference.
"We are going to get into more and more problems with the issues that are surfacing now on servicing," Bair said. Resulting litigation could "ultimately be very damaging to our housing markets if it ends up prolonging those foreclosures that are necessary and justified," she said. Bair didn't provide details on what other problems she thought might arise.
Housing markets were "weak" in September and early October, with "sluggish or declining" sales in many regions, the Fed said in its Beige Book business survey last week. There were "scattered reports of some improvement."
"Respondents' outlooks suggested sales and construction would remain subdued through year-end," restrained in part by lending standards and "general economic uncertainty," the Fed said.