JIM LEHRER: New warnings today added to fears of what foreclosure problems could mean for the U.S. economy. They came as executives of major banks faced a congressional hearing.
The report on home foreclosure problems came as many mortgage lenders have resumed selling foreclosed properties. They had been frozen for a time, after revelations of faulty paperwork in thousands of cases. The congressionally created panel that oversaw big bank bailouts went on to investigate the foreclosure problems.
The panel’s new chairman is former Senator Ted Kaufman, a Delaware Democrat.
TED KAUFMAN (D), chairman, Congressional Oversight Panel: Employees or contractors of Bank of America, GMAC Mortgage, and other major loan services testified to signing thousands of foreclosure documents, even though they had no knowledge of the underlying facts. If these reports reflect a disregard on the part of banks for the legal requirements of a closure, that alone would be unconscionable.
JIM LEHRER: In the worst-case scenario, the panel says courts could block foreclosures. Banks would be left holding bad mortgage loans that cost them billions of dollars. That in turn would deepen disruption in the housing market.
But, in the best case, the Oversight Panel acknowledges, concerns about mortgage documents may prove to be overblown, a view embraced by the financial industry. This afternoon, executives from two major lenders, J.P. Morgan Chase and Bank of America, appeared before the Senate Banking Committee.
Bank of America is an underwriter of the NewsHour. The committee pressed them on today’s report and their plans for managing foreclosures going forward.
SEN. CHRISTOPHER DODD (D-Conn.): Many believe that the robo-signing errors are simply the tip of a much larger iceberg, that they are emblematic of the much deeper problems at the mortgage servicing business, problems that have resulted in homeowners, of course, losing their homes in unjustifiable foreclosures. In fact, servicing practices may be putting homeowners at risk.
JIM LEHRER: Both banks had temporarily suspended foreclosures, pending internal reviews. And Bank of America today said it’s making changes.
BARBARA DESOER, president, Bank of America Home Loans: We were the only servicer who stopped foreclosure sales nationwide to review our procedures. We know the concerns are not just technical issues. We have confirmed that the basis for our foreclosure decisions has been correct and accurate, but we didn’t find a perfect process.
JIM LEHRER: Also testifying at the hearing was Iowa Attorney General Tom Miller, who is leading a 50-state probe of foreclosure practices.
TOM MILLER, Iowa Attorney General: We view this as a chance to solve some or much of this problem that’s hung on for over three years, as Senator Dodd outlined. It started as a mess, the robo-signing. We want to figure out a way that it — it leaves the whole situation much better than when the mess started.
JIM LEHRER: A second hearing will take place before the House Financial Services Committee on Thursday. In the meantime, the Obama administration has said it sees no reason for a mandatory nationwide halt to foreclosures.
And to Judy Woodruff.
JUDY WOODRUFF: And we get the latest now on the foreclosure problem and what’s being done about it. Brady Dennis has been covering this story for The Washington Post. And he joins us from the Post newsroom now.
Brady Dennis, thank you for talking to us. First of all, what sense do we get, do you get today, after hearing this testimony, and based on all your reporting, of just how serious the foreclosure situation is in this country right now?
BRADY DENNIS, The Washington Post: You know, I think that’s truly something that everyone, from the regulators to lawmakers to the banks themselves, are still wrestling with, trying to get a handle on just how deep this problem goes, and, you know, how serious the reverberations from it may be.
Last night, Senator Ted Kaufman, who now heads the Congressional Oversight Panel, I think put it succinctly and pretty well, when he said this may turn out to be essentially nothing, and this may turn out to be a really huge deal. And I think we’re seeing, in real time, folks on all sides sort of still wrestle with that question.
JUDY WOODRUFF: Well, and so, in terms of mistakes that have been made, clearly, some mistakes have been made by some banks, some of the mortgage servicers. We heard more testimony about that today. That is an ongoing unresolved question; am I right?
BRADY DENNIS: Right. I think — I think, no doubt, huge mistakes have been made. And I think you saw some of that today. The banks, Bank of America and J.P. Morgan, who were present own up to some of those mistakes, namely the robo-signing that we have all heard about and some of the other paperwork issues.
The question, I think, is going to be the fallout from that. On one level, you could have big problems for the banks in the nation’s courts, as they’re trying to foreclose on these homes, whether judges accept new paperwork or throw out cases based on the problems, the faulty paperwork that the banks submitted.
On the flip side of that, you have large institutional investors now threatening lawsuits against banks, investors who had invested in large mortgage-backed securities saying, you know, that they intend to sue and make the banks buy back some of these mortgages, some of these securities, if investors were misled due to these problems.
And I think that’s another worry that could be very, very costly for the banks. And, in that worst-case scenario, that — that could be very troublesome.
JUDY WOODRUFF: How serious is the evidence, Brady Dennis, that the Iowa attorney general and others put forward today about what the banks have done?
BRADY DENNIS: Well, you know, I think — I was able to speak with Tom Miller this morning, before he headed to Capitol Hill.
And I think they’re still digging into the extent of the problems. But I think what he reiterated time and again, he is invested, and along with others attorneys general, in getting to the bottom of the — if the law was broken and what remedies there are to that.
JUDY WOODRUFF: Right.
BRADY DENNIS: But he seemed to be more intent on saying this is an opportunity to force the banks to focus more on modifications and to putting more manpower and resources and money into that process.
So, I think, you know, what we ultimately might see, even though it’s early, is an effort — is some sort of settlement with banks, in which it’s not just fines, but rather, you know, an agreement to put more resources toward helping people stay in their homes, rather than just foreclosing.
JUDY WOODRUFF: And, in fact, there were wire reports today that perhaps they’re getting closer, some of the banks, and the — I guess the attorney general and the group of attorneys general he represents.
What — what, in general, would you — how would you describe the tone of what the banks are saying? What’s their defense?
BRADY DENNIS: Well, the banks, up until this point, you know, while acknowledging problems, have generally said this is an oversight on our part, a paperwork problem that essentially can be — we can resubmit paperwork to the courts, and this will be a problem that will essentially — something that can be fixed.
You know, Tom Miller and you certainly saw lawmakers on the Senate panel today say, you know, hold on a minute. It’s not simply a technical problem, and, you know, we’re going to keep after that and get to the bottom of how serious it really is.
JUDY WOODRUFF: And I was struck by the number of senators on both sides of the aisle, both political parties, who said they were being inundated in their offices with complaints from homeowners who have been foreclosed on, even though they were in the process of having a loan, a mortgage modified.
BRADY DENNIS: That’s right. I mean, another — you saw that anger, because certainly they have been just bombarded with the experiences of individual homeowners.
And another problem that keeps coming up in this is what’s known as a dual track or sort of a parallel track that troubled homeowners get on, where, at the very time that they’re trying to work out a modification with a bank, they’re also going through the foreclosure process.
And it’s very, as you can imagine, scary and troubling and quite confusing for homeowners, who are trying to stay in their home and are trying to do a modification, and yet the foreclosure proceedings against them are going forward.
And so I think that’s something that the banks talked about trying to change today, but certainly the lawmakers and the state attorneys general want to force a change on that.
JUDY WOODRUFF: Well, we know the senators and I guess House members do plan additional hearings on this. And, Brady Dennis, we thank you very much for being — talking to us.
BRADY DENNIS: My pleasure.