An initial negotiation has been reached between banks and the federal investigation into the robosigning scandal. The scandal has shaken several people’s confidence in the real estate finance industry. The nation’s largest mortgage loan companies were found to have rubber stamped foreclosure documents without making sure that it had been done properly, and many people were foreclosed on that did not deserve it. A legal probe into foreclosure practices has reportedly reached a negotiation with those lenders.
JPMorgan exec discloses deal with some federal agencies
Reuters reports that JPMorgan Chase Chief Executive Officer, Jamie Dimon, explained that there was an agreement made recently with mortgage loan companies being investigated due to the robosigning. Dimon confirmed that no fines had been levied yet, but they’re likely to come. About a dozen federal agencies and every attorney general in each state was doing an investigation to the largest mortgage lenders. Only financial institutions in the Office of the comptroller of the Currency, the Office of Thrift Supervision and the Federal Reserve are in the negotiation that has yet to be complete. A settlement with all 50 state attorneys general has not been reached.
Possible state settlements
The controversy stemmed from the discovery that a lot of foreclosure proceedings started when paperwork to start foreclosures was approved in a robotic fashion, or "robo-signed," without proper review. The robosigning problem needs to be solved easily. This is because foreclosure practices change sometimes. Bloomberg reports that JPMorgan plans to hire 3,000 new employees to make sure every little thing works out. In other words, there could be an increased amount of regulation in the mortgage industry when it comes to foreclosures, which means it will cost the loan companies in the mortgage industry more to lend and service a loan. Those costs can be passed on to the consumer at some point, likely in the form of requiring more money up front to get a loan. Since banks have been more worried about foreclosing lately, there’s a huge backlog of foreclosures on the books.
Not much with the mortgage modification program taking place
The mortgage modification programs were some of the biggest failures in all of the stimulus programs the Obama administration put together. Any person could apply for a modification if they were about to be foreclosed upon and were behind on mortgages. Any lender that was willing to modify a borrower's mortgage would be getting incentive payments from the government. USA Today reports that few individuals really used it. Between 3 million and 4 million people were in the goal to be kept in homes. There ended up being only about 630,000 individuals helped out with permanent modifications of mortgages.
Articles cited
Reuters
reuters.com/article/2011/04/13/us-financial-regulation-foreclosures-idUSTRE73C3DV20110413
Bloomberg
bloomberg.com/news/2011-04-13/jpmorgan-says-foreclosure-accord-with-federal-reserve-occ-may-come-today.html
USA Today
usatoday.com/money/economy/housing/2011-04-12-mortgage-borrowers-letters.htm?loc=interstitialskip
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