Banks face a grilling over foreclosures

City A.M. Reporter
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 tomorrow and Thursday will include the first appearances by executives from major US lenders like Bank of America and JPMorgan Chase since the furore over sloppy foreclosure paperwork erupted in September.

Banks are accused of using “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,” said Democratic Senator Tim Johnson, who is expected to lead the Banking Committee next year.

Other witnesses at tomorrow’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 traction due to fears it would further depress home sales and crimp economic growth.