Foreclosure crisis: Federal Bailout Oversight Panel Raises Alarms

During a recent hearing members of a congressional panel responsible for monitoring the government’s bailout programs gave alarm and frustration over the possible repercussions of the home foreclosure crisis.

This hearing conducted by the bipartisan Congressional Oversight Panel was initially to examine the Treasury Department’s foreclosure prevention programs designed to help the foreclosure crisis. But panelists actually focused much of their attention on the fact that some of the nation’s largest mortgage Servicers regularly submitted faulty and fraudulent foreclosure paperwork.

Sadly, the foreclosure crisis continues to rise.

Sen. Ted Kaufman (D-Del.), the panel’s austere chairman said in opening remarks that the problems “are already undermining investor and homeowner confidence in the mortgage market, and they threaten to undermine Americans’  fundamental faith in due process.”

Foreclosure Crisis: Uproar

Recent month’s revelations caused lenders such as Bank of America, Ally Financial and J.P. Morgan Chase to stop foreclosures temporarily and giving some hope that the foreclosure crisis was slowing. The uproar also has triggered numerous state and federal investigations, which led more homeowners to challenge the legitimacy of their foreclosures and prompted large investors to threaten lawsuits and insist that big banks purchase back failing loans during this foreclosure crisis.

The head of the Treasury Department’s  homeownership preservation office, Phyllis Caldwell, at the hearing called the behavior of the mortgage servicers “unacceptable.” Agency officials, she said, are examining the possible fallout and have insisted that Servicers follow the law.  “We’re looking at the situation very, very closely,” Caldwell told the panel members. “At this point in time, there is no evidence that there is a systemic risk to the financial system.”

Foreclosure Crisis: Skeptical Members

However, some members of the panel appeared skeptical, noting that if lawsuits from large investors grows, big banks could lose billions. “It is not a plausible position that there is no systemic risk here,” said panel member Damon Silvers, director of policy and special counsel to the AFL-CIO.

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Resources:

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/27/AR2010102705228.html?sid=ST2010102705416

Foreclosure Crisis – what’s next?