That's one clear conclusion of a new 15-page report, "Interagency Review of Foreclosure Policies and Practices," issued by the Federal Reserve, Office of the Comptroller of the Currency and Office of Thrift Supervision, three federal agencies that are supposed to regulate banking institutions.
The report may be most noteworthy for its finding of serious deficiencies in loan servicers' foreclosure operations and its tepid recommendations for improvement.
And the report also contains an illuminating and troubling section that outlines the harm that has been and could be caused by these rogue companies:
- Foreclosures with inaccurate documentation.
- Foreclosures that shouldn't occur due to other intervening circumstances.
- Violations of state foreclosure laws designed to protect consumers.
- Inaccurate fees and charges assessed against borrowers and their property, making it harder for borrowers to bring their loans current.
- Foreclosures that occur even though the borrower has been approved for a loan modification.
- Delays of a year or longer in foreclosure processing.
- Slow clearing of excess inventory of foreclosed properties, leading to extended periods of depressed home prices.
- Inefficient disposition of foreclosed homes and clearing of seriously delinquent mortgages, particularly in areas with high concentrations of vacant and abandoned properties.
- Impediments to communities working to stabilize local neighborhoods and housing markets.
- Adverse effects on neighborhoods of foreclosed homes that remain vacant for extended periods, particularly if the homes aren't properly maintained.
- Depressed homebuyer and investor confidence.
- Adverse effects on efforts to attain a stable national housing market.
- Financial cost of remedying procedural errors and refiling affidavits and other foreclosure documents.
- Legal costs related to disputes over note ownership or authority to foreclose, and allegations of procedural violations through the use of inaccurate affidavits and improper notarizations.
- Uncertainty for investors in securitized mortgages.
- Increased demands on courts to resolve foreclosure-related matters, including note ownership.
- Loss of confidence in the reliability of affidavits filed on behalf of servicers as persuasive evidence.
Bottom line: That's all bad.
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