October 8, 2010
Lenders and Servicers Should Be Required to Obtain Regulatory Certification of Compliance, After a Full Audit, with All Laws & Regulations Governing Foreclosures and Modifications
WASHINGTON, D.C. — Consumers Union, the nonprofit publisher of Consumer Reports, called for a nationwide moratorium on home foreclosures in light of recent revelations that some lenders failed to comply with laws requiring proper documentation governing foreclosures.
“The widespread reports that lenders and servicers had employees sign thousands of foreclosure papers a day shows that they failed to follow the most basic standards of honesty and decency,” said Gail Hillebrand, Director of Consumers Union’s Defend You Dollars campaign. “Foreclosures must stop until we can be sure that these problems are completely cleaned up. We need both thorough independent audits and strong regulatory scrutiny.”
Consumers Union said that lenders and servicers should be required to stop all foreclosures until they can demonstrate compliance with all laws, regulations, contract guidelines, and stated internal policies, related to foreclosure, loan modifications, and other forms of foreclosure avoidance. Lenders and servicers should be required to:
• Obtain an independent audit evaluating and describing the current level of compliance, as well as identifying any deficiencies in the past 36 months.
• Make public the results of the audit.
• Correct any deficiencies identified in the audit and undergo a re-audit after six months until an audit shows that all deficiencies in compliance have been fully corrected.
• When there has been a clean audit determining that there are no (remaining) deficiencies in compliance, present the clean audit to the primary regulator, undergo a thorough regulatory examination for compliance, and obtain the permission of the regulator to resume foreclosures based on an independent determination of the regulator of full compliance with all such laws, requirements, and policies.
• Negotiate with the primary regulator and with law enforcement including the State Attorneys General, with input from groups representing affected borrowers and affected communities, a plan to remedy the harm from past noncompliance.
Consumers Union also called on Congress to revive legislation to give judges in bankruptcy court the discretion to impose loan modifications in bankruptcy. “Bankruptcy judges should have the discretion to write down a home loan when that is the fairest approach for the homeowner and all of the creditors,” said Pamela Banks, Senior Policy Counsel at Consumers Union.
David Butler – 202-462-6262 or Michael McCauley – 415-431-6747