FHFA: Full Scope of Foreclosure Processing Problems Still Unknown
Federal Home Finance Agency (FHFA) Acting Director Edward J.rnDeMarco told the House Judiciary Committee Thursday that regulators, lawmakers,rninvestors, and the general public want answers to the questions raised by thernrecent breakdown in foreclosure processes “and we want them now.” Testifying in a hearing on ForeclosedrnJustice: Causes and Effects of thernForeclosure Crisis, DeMarco said that shortly after robo-signing and titlernissues were first reported, FHFA issued a four point policy framework tornFreddie Mac, Fannie Mae (GSE’s) and their servicers. The four points were:</p<ul class="unIndentedList"<liVerify that the foreclosure process is workingrnproperly;</li<liRemediate any deficiencies indentified inrnforeclosure processing;</li<liRefer suspicions of fraudulent activity; and</li<liAvoid delay in processing foreclosures in thernabsence of identified problems.</li</ul
The GSE’s are gathering information on the full naturernand extent of servicer problems. Thusrnfar, DeMarco said, only a small number of servicers have reported problems butrnthese servicers manage a large portion of GSErnbusiness. It is difficult to determinernhow many delinquent loans may be affected or how difficult it might be tornaddress the deficiencies as they differ in size and scope and not all loansrnhandled by a particular servicer may be affected. The current review is being conducted on arnfile-by-file basis so assessing the problem may take a substantial amount ofrntime and resources. </p
FHFA is also participating in a multi-agency examination ofrnthe Mortgage Electronic Registration Systems (MERS) and is reviewing thernGSE’s oversight of their counterparties. rnFHFA, however, has no regulatory authority over servicers and thernGSE’s relationships are contractual rather than regulatory. DeMarco said that FHFA expects compliancernwith the law from all of its servicers and from the law firms they engage and thernGSE’s may pursue remedies for violations of those contracts.</p
The Acting Director said he does not support a blanketrnmoratorium on foreclosures because the costs to neighborhoods, taxpayers, andrninvestors would be enormous. The focusrnshould instead be on fixing any problems that are found and moving forward withrnproper and legal foreclosures where other alternatives have been exhausted. “Delayrnis costing taxpayers money and creates undesirable incentives for homeowners tornstop paying their contracted mortgage obligations,” he said.</p
FHFA is also reviewing the GSE’s practices in enforcingrnreps and warrants and it expects adherence to contract terms with regard tornmortgages the GSE’s purchase and in regard to mortgage servicing.
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