Lenders Face Lawmaker Wrath Over Foreclosures

WASHINGTON/CHARLOTTE, North Carolina (Reuters) –
Banks under fire over their foreclosure practices face
twin hearings in Congress this week, at which they
will come under renewed pressure to find ways to
keep borrowers in their homes.

The hearings on Tuesday and Thursday will include
the first appearances by executives from major
lenders like Bank of America <BAC.N> and
JPMorgan Chase since the furor over
sloppy foreclosure paperwork erupted in September.

Banks are accused of having used “robo-signers” to
sign hundreds of foreclosure documents a day, a
fiasco that has reignited public anger with banks that
received billions of dollars in taxpayer aid during the
financial crisis.

Lenders will be pressed on whether the paperwork
problems are further evidence that modifying loans is
a better alternative to eviction.

“Foreclosure should be the last option and we need to
examine barriers to mortgage modifications,”
Democratic Senator Tim Johnson, expected to lead the
Banking Committee next year, said in an emailed
response to Reuters.

Other witnesses at Tuesday’s Senate Banking
Committee hearing include Iowa Attorney General
Tom Miller, who is leading a 50-state probe of
foreclosure practices.

Miller’s testimony will be closely watched. A
settlement with lenders could include fines or
commitments to loan modifications.

Bank of America and JPMorgan were among banks that
temporarily suspended foreclosures pending internal
reviews of their practices, but have since begun to
resume sales of foreclosed properties.

Some lawmakers and consumer activists called in
October for all lenders to institute a national
moratorium on foreclosures, but they failed to gain

Real estate data company RealtyTrac said the
temporary suspensions by banks led to a 9 percent
drop in U.S. foreclosures in October from the month
prior.

Republican Representative Spencer Bachus, the front-
runner to be chairman of the House Financial Services
Committee next year, said the paperwork problems
are “disturbing,” but singled out federal regulators for
criticism.

“It is disappointing that the regulators didn’t catch
this before the media since most of the problems in
the contested foreclosure proceedings occurred at
the nation’s largest banks,” Bachus told Reuters in an
email.

The House panel’s foreclosure hearing is set for
Thursday.

COST TO BANKS

The mortgage paperwork mess threatens to eat into
bank profits by delaying sales of bank-owned
properties, drawing fines from regulators, and
spawning lawsuits from both homeowners and