Congressional panels warns about hard impact of foreclosures
Congressional panels warns about hard impact of foreclosures
The foreclosure documents fiasco, which has prompted an ongoing federal investigation, could have grave consequences for banks, lenders and the whole housing market, the Congressional Oversight Panel warned on Tuesday.
The panel outlined in its latest report about a host of potential problems that the foreclosure mess can create. It describes a best-case scenario, where the fear of erroneous filings would be judged as “overblown” and lenders would just resume their normal foreclosure operations with revised paperwork. But the watchdog of the federal stimulus program also warns about a situation where banks could lose billions of dollars.
“If such problems were to arise on a large scale, the housing market could experience even greater disruptions than have already occurred, resulting in significant harm to major financial institutions,” the panel’s report said. “At present the reach of these irregularities is unknown.
The panel said that up to $52 billion would be lost by banks from mortgage put-backs. These are loans which have been sold to third-party investors but had to be purchased back due to filing problems.
The foreclosure mess started in September when banks were accused of using so-called “robo-signers” to sign foreclosure documents as quickly as possible without a thorough review. The seemingly careless process of kicking people out their homes sparked public outcry directed at banks who received much stimulus money from taxpayers.
Institutions such as All Financial, Bank of America and JPMorgan voluntarily stopped their foreclosure processing and initiated their own investigation of employees’ handling of foreclosure files, but they all recently resumed their foreclosure practices.
Posted by
James Fried
on Tuesday November 16 2010, 9:58 AM EST.
Ref: Reuters.
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