FDIC chair: Regulators will uncover more flaws in foreclosures
(Bloomberg News) — Regulators are likely to discover more problems related to loan servicing by some of the biggest banks as they probe claims that documents were mishandled, Federal Deposit Insurance Corp. Chairman Sheila Bair said.
"We are going to get into more and more problems with the issues that are surfacing now on servicing," Bair said today at a housing conference in Arlington, Virginia. Resulting litigation could "ultimately be very damaging to our housing markets if it ends up prolonging those foreclosures that are necessary and justified," she said. Bair didn't provide details on what other problems she thought might arise.
JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc.'s GMAC Mortgage unit are among loan servicers that temporarily halted foreclosures to review paperwork after court documents showed employees may have submitted affidavits without confirming their accuracy.
The FDIC, the Federal Reserve and the Office of the Comptroller of the Currency are conducting joint examinations, with teams inside the firms responsible for handling mortgage payments from homeowners. Results of those exams will determine the federal government's next steps, Bair said.
"Ultimately this problem will require some type of global solution," she said. "In developing that solution, I would suggest that all interested parties consider some type of triage on foreclosures" such as safe harbor relief for vacant properties or interest-rate reductions for borrowers.
Bair said she doesn't think congressional legislation will be needed to address the issue.