Fed investigates foreclosures

Fed investigates foreclosures

The U.S. Federal Reserve is currently investigating if mortgage firms circumvented existing regulations and their own practices regarding foreclosures, Fed Chairman Ben Bernanke confirmed on Monday.

It will take until next month for the initial results of the probe to be available, Bernanke said during a housing conference in Virginia.

“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,” he said. “We take violation of proper procedures very seriously.”

The Fed action comes after state financial regulators started their own collective investigation to find out whether lenders engaged in fraudulent means to kick people out of their homes.

The joint probe is being undertaken by state attorneys general from all 50 states and D.C. to discover irregularities in document handling. The Department of Treasury’s Office of the Comptroller of the Currency has also made its own inquiry, requesting seven major banks last week to revisit their foreclosure procedures. In addition, the Federal Deposit Insurance Corp. and the OCC are assisting the central bank on its investigation.

The Fed is also examining the impact of the foreclosure mess on the real estate sector and on financial firms nationwide, Bernanke said.

After the findings are determined, the Fed and other federal regulators can choose to issue a “cease and desist” order for the firm to halt a specific operation, or impose fines and penalties. They can also order more lenient sanctions, such as allowing mortgage companies to craft a plan to address issues.

Posted by James Fried on Tuesday October 26 2010, 5:31 AM EST. Ref: AP. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0