In a February hearing before the Senate Banking Committee, U.S. Comptroller of the Currency (OCC) John Walsh testified that a OCC probe into alleged misdeeds by banks during “Foreclosure-Gate” found that very few wrongful foreclosures have taken place. The OCC is attempting to settle legal allegations against some of the nation’s largest mortgage lenders and servicers, and the proposed settlement has been criticized by the coalition of state attorneys general and several federal agencies for letting the banks off too easily.
Today, financial news giant Reuters announced that it had performed its own analysis of the OCC’s findings, and its analysis does not support Walsh’s conclusion.
The OCC’s investigation was initiated when it was discovered that numerous large banks had mishandled or lost crucial mortgage and foreclosure records, had engaged in “robo-signing” untold numbers of legal documents presented to courts in foreclosure cases, and may have fraudulently reassigned mortgages that had been securitized. Fears that many thousands of homeowners nationwide may have been the victims of wrongful foreclosure and eviction prompted the OCC to perform formal bank examinations on 14 of the largest lenders.
“Our work identified a small number of foreclosure sales that should not have proceeded,” Walsh told the senators. However, in an appearance at a recent Reuters Future Face of Finance Summit, Walsh clarified that the actual number of wrongful foreclosures could turn out to be “in the tens of thousands.”
Walsh also told the Senate Committee that the OCC’s examinations, which took place between October of last year and January, showed that the banks and loan servicers generally did have proper mortgage documentation, and that the securitized mortgage investor trusts had legitimate ownership of the mortgages.
However, a string of recent court decisions have found otherwise. A number of courts across the nation have ruled that the investor trusts did not own the mortgages. Legal records examined by Reuters and others have also found that many thousands of mortgage assignments involving investor trusts were fraudulent.
Reuters calls OCC’s method of estimating wrongful foreclosures ‘flawed’
Reuters’ analysis of the OCC report found that the conclusion that only a small percentage of foreclosures during Foreclosure-Gate were illegal was based on a sample of only 2,800 foreclosure files — of more than a million foreclosures that took place last year. The company also said that the method the OCC used to estimating the number of wrongful foreclosures was flawed.
How common are inaccurate or fraudulent foreclosure documents? Illinois bankruptcy and foreclosure defense lawyer O. Max Gardner III says that they are used virtually without exception in his experience.
In all of the foreclosure cases Gardner has handled, “I’ve never seen a complete chain of transfers and of the (mortgage promissory) note” he told Reuters.
“We see a problem with the dollars and cents in almost every single bankruptcy case that I file,” he said.
Attorney Joe Klein of Legal Aid of Collier County, who represents indigent homeowners in Florida foreclosure cases, said that he sees false or inaccurate bank documents in virtually every case.
“They’re always frauds and forgeries,” he said.
Source: Westlaw News & Insight, “Doubts raised on OCC foreclosure estimate,” Scot Paltrow, March 25, 2011