The ongoing "turmoil" roiling megabanks and their faulty home foreclosure practices may represent deeper, more systemic problems regarding the origination, transfer and ownership of millions of mortgages, potentially putting Wall Street on the hook for billions of dollars in unexpected losses and threatening to undermine "the very financial stability that the Troubled Asset Relief Program was designed to protect," a government watchdog warns in a new report.
Recent revelations regarding mortgage companies' use of "robo-signers" when processing foreclosure documents "may have concealed much deeper problems in the mortgage market," according to the Tuesday report by the Congressional Oversight Panel, an office formed to keep tabs on the bailout.
Disclosures by big banks that they employed people whose sole job was to essentially rubber-stamp foreclosure documents without reading them or verifying basic facts led firms like JPMorgan Chase, Wells Fargo and Bank of America to halt home repossessions beginning in late summer and early fall.
In turn, all 50 state attorneys general, federal prosecutors and a host of federal agencies began probing exactly what went wrong, and whether the use of robo-signers represented a one-time mistake or if they're emblematic of broader legal shortcuts taken to cut costs and disguise other shortcomings. The industry is fighting to calm regulators, investors, and members of Congress by arguing the revelations represent isolated cases that are being quickly resolved.
Tuesday, November 16, 2010
'Robo-Signer' Foreclosure Scandal May Threaten Fundamental Financial Stability, Government Watchdog Warns
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