An influential U.S. senator on Tuesday raised the prospect of an industry-wide moratorium on foreclosures as he pressed three banks accused of fraudulent practices to outline steps they are taking to fix their procedures.
It is simply inexcusable that proper oversight proceedings were not in place, especially when dealing with matters as monumental as the seizure of a family's home, Senator Robert Menendez wrote to the heads of JPMorgan Chase and Co, Bank of America Corp and Ally Financial Inc, formerly known as GMAC and 56.3 percent owned by taxpayers.
At least one credit rating agency, Fitch, states that it believes this problem is widespread among banks and servicers, which raises the question of whether other banks should impose a moratorium until this lack of oversight is corrected, wrote Menendez, the head of a Senate subcommittee on housing.
Lenders are scrambling to defend and improve their foreclosure procedures, which are facing scrutiny in state courts and from regulators.
The issue came to the forefront last month when Ally revealed that officials had signed thousands of affidavits supporting such proceedings without having personal knowledge of the borrower's situation.
Banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year and just 100,000 as recently as 2005, real estate data company RealtyTrac Inc said last week.
At least six states are investigating the foreclosure procedures of Ally, JPMorgan Chase or both.
JPMorgan Chase has come under investigation in California and Connecticut. The bank had already announced it was delaying foreclosure proceedings.
Bank of America on Friday suspended some of its foreclosures in 23 states to review whether it has been conducting them properly.
U.S. mortgage servicers are already struggling to deal with the millions of homeowners unable to pay their mortgages, and the announcements by the three firms have raised concerns that process could grind to a halt.
(Reporting by Corbett B. Daly; Editing by Andrea Ricci)