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  • COP November Report: "Robo-Signed" Foreclosures and Mortgage Irregularities

    The Congressional Oversight Panel has released its November report. This month the panel explores the potential impact of "mortgage irregularities" and "foreclosure mitigation" on the mortgage market and the economy. The panel took a close look at some of the foreclosure practices of banks, especialy the practice of "robo-signing" foreclosure related affidavits. From the release: If documentation problems prove to be pervasive and throw into doubt the ownership of pooled mortgages, the consequences could be severe. Borrowers may be unable to determine whether they are sending their monthly payments to the right people. Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments. Multiple banks may attempt to foreclose upon the same property. Borrowers who have already suffered foreclosure may seek to regain title to their homes and force any new owners to move out. Would-be buyers and sellers could find themselves in limbo, unable to know with any certainty whether they can safely buy or sell a home. Further wide-scale disruptions in the housing market, if they arose, could cause significant harm to financial institutions. For example, if a Wall Street bank were to discover that, due to shoddily executed paperwork, it still owns millions of defaulted mortgages that it thought it sold off years ago, it could face billions of dollars in unexpected losses. To put in perspective the potential problem, the mortgage-backed securities market totals approximately $7.6 trillion, so irregularities that affect even a small percentage of this market could have dramatic effects on bank balance sheets - potentially posing risks to the very financial stability that the Troubled Asset Relief Program was designed to protect. The Panel urges Treasury and bank regulators to undertake new "stress tests" to gauge the ability of major financial institutions to cope with a potential documentation-related crisis. COP chair Sen. Ted Kaufman discusses the report in this video: Read the full report here.

  • Congressional Oversight Panel Calls on Treasury to do More to Stem Off Foreclosure Crisis

    Members of the Congressional Oversight Panel --tasked by Congress to provide oversight of the Treasury Department's actions in managing the Troubled Assets Relief Program (TARP)--"applaud" what they see as Treasury's improved response to the foreclosure crisis, but say that "even now Treasury’s programs are not keeping pace with the foreclosure crisis." Here's an excerpt from COP's latest monthly report: Despite Treasury’s efforts, foreclosures have continued at a rapid pace. In total, 2.8 million homeowners received a foreclosure notice in 2009. Each foreclosure has imposed costs not only on borrowers and lenders but also indirectly on neighboring homeowners, cities and towns, and the broader economy. These foreclosures have driven down home prices, trapping even more borrowers in a home that is worth less than what they owe. In fact, nearly one in four homeowners with a mortgage is presently underwater. Although housing prices have begun to stabilize in many regions, home values in several metropolitan areas, such as Las Vegas and Miami, continue to fall sharply. Treasury’s response continues to lag well behind the pace of the crisis. As of February 2010, only 168,708 homeowners have received final, five-year loan modifications – a small fraction of the 6 million borrowers who are presently 60+ days delinquent on their loans. For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble. Treasury’s stated goal is for HAMP (Home Affordable Modification Program) to offer loan modifications to 3 to 4 million borrowers, but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status. Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem. COP Chair Elizabeth Warren introduces the April report in this video: Read the full report here .

  • Congressional Oversight Panel October Report: Assessing Foreclosure Mitigation Efforts

    The Congressional Oversight Panel addressed the problem of foreclosures in its March report , and is now revisiting the issue in its October report. Since March, the Treasury Department has initiated the Making Home Affordable (MHA) program. And COP has concerns over the scope, scale, and permanence of the MHA's programs: While Treasury must consider programmatic changes to meet these challenges, so too must it adapt and improve the existing programs in several key ways. Given the issues facing MHA, Treasury must be fully transparent about the effectiveness of its programs, as well as the manner in which they operate. Although Treasury‟s data collection has improved significantly since the Panel‟s March report, it should be expanded, and the information should be made public. Treasury should release its Net Present Value (NPV) model, which is used to determine a homeowner‟s eligibility for HAMP. The new denial codes should be implemented to provide borrowers with a specific reason for denying a modification and a clear path for appeal. Denial information should also be aggregated and reported to the public. Here is COP chair Elizabeth Warren discussing the October report: You can read the full report here . And a dissenting view from COP member Rep. Jeb Hensarling (R-TX) here .