Banks likely face fines over foreclosure mess
Foreclosure headline in a newspaper
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Kai Ryssdal: This introduction is going to be one of those that sounds a whole lot less interesting than the story actually is. But bear with me.
The Senate Banking Committee held a hearing today on the progress that regulators are making in fixing the financial system. Suffice it to say, they're making some progress on credit card fees and oversight rules, mostly.
In particular today, mishandled home foreclosures were at issue. Robo-signing and wrongful evictions. The country's biggest banks have been under investigation and could be facing billions of dollars in fines.
Marketplace's Stacey Vanek Smith reports.
Stacey Vanek Smith: Just a few months ago, several big banks had to freeze thousands of foreclosure cases as evidence emerged that officials were cutting corners with the paperwork.
Today, a federal regulator that's been probing 14 big banks, including Wells Fargo and Bank of America, said it's found evidence of wrongdoing, though the vast majority of foreclosures were legally sound. Along with federal authorities, state attorneys general have also been investigating mortgage lending practices.
Adam Levitin: We're likely to see both a federal settlement and a state attorneys general settlement soon.
Adam Levitin is an expert in housing law at Georgetown.
Levitin: The settlements are likely to include a monetary fine component, as well as a set of standards that servicers agree they will comply with going forward.
Levitin esimates the fines will total tens of billions of dollars. He says instead of paying the governments, banks may be required to apply that money toward helping distressed homeowners by modifying their loans. Banks have defended their foreclosure decisions as valid and the problems there were as clerical errors.
Harvard housing expert Nicolas Retsinas says the sooner state and federal regulators can hash this out, the better.
Nicolas Retsinas: There's no question that they ought to be help accountable. On the other hand, we ought to be careful that it doesn't obscure the major issue, that we have a foreclosure crisis. And to the extent that we delay the foreclosure process, it's going to delay the recovery.
The number of homes in foreclosure remains at historic highs, but the Mortgage Bankers Association did have some good news today. The percentage people falling behind on their mortgage payments has slowed to pre-recession levels.
In New York, I'm Stacey Vanek Smith for Marketplace.