Examining the extent of mishandled foreclosures at the largest mortgage servicers and fixing a broken system will take more than a year, according to Acting Comptroller of the Currency John Walsh.
Last fall, servicers were found to be signing foreclosure affidavits en masse and without a legal review of the loan files in a scandal that became known as robo-signing. Federal regulators and state attorneys general found oversight and procedural problems across the entire industry and forced 14 of the largest banks — firms that serviced 68% of the mortgages in the U.S. — to sign consent orders. The actions also included two firms that handled documents in foreclosure cases: Lender Processing Services (LPS: 14.18 +2.31%) and Mortgage Electronic Registration Systems.
They agreed to hire third parties to examine nearly 4.5 million foreclosure files for any potential financial harm and to establish new policies to properly evaluate borrowers for a slew of other options before proceeding with a foreclosure.
"Unfortunately, such a complex process will take another year and more to complete," Walsh said before the Institute for International Finance Friday. "I wish it could be completed more quickly, but it’s important that it be done correctly and in a way that assures fair treatment for homeowners who underwent foreclosure proceedings."
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