The Treasury Department official leading Obama administration efforts to stem foreclosures said the government is working to ensure borrowers are being treated fairly while avoiding delays that could lower housing prices.
Federal regulators have “stepped up compliance efforts” in response to claims that banks may have used faulty documents to seize homes, said Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, in testimony today for a congressional oversight panel. The U.S. is aiming to make sure lenders are proceeding properly on foreclosures while avoiding delays that could harm real-estate markets, she said.
“Longer foreclosure timelines will likely lead to lower sales prices of houses that are already in the foreclosure process,” Caldwell said. “This would hurt homeowners and home-buyers alike at a time when foreclosed homes make up 25 percent of home sales.”
Caldwell appeared before the Congressional Oversight Panel for the Troubled Asset Relief Program, which called a hearing to review President Barack Obama’s foreclosure-prevention efforts. Panel members used the hearing to probe Treasury’s response to questions surrounding foreclosure documentation, which led Ally Financial Inc., JPMorgan Chase & Co. and Bank of America Corp. to temporarily halt home seizures.
Eleven U.S. agencies are examining the matter and attorneys general from all 50 states have launched an investigation, Caldwell said.
“We are watching this every day,” she said. “At this stage there appears to be no evidence of systemic risk.”
The documentation questions have increased pressure on lenders already facing investor demands that they buy back defaulted loans that were poorly underwritten.
Pacific Investment Management Co. LLC, BlackRock Inc., MetLife Inc., the Federal Reserve Bank of New York, Freddie Mac and other holders of mortgage-backed securities are seeking to force Bank of America to repurchase mortgages packaged into $47 billion of bonds by its Countrywide Financial Corp. unit. In an Oct. 18 letter to the bank, the group cited alleged failures by Countrywide to service the loans properly.
“It’s not a plausible suggestion that there’s no systemic risk here,” said Damon Silvers, a panel member and director of policy at the AFL-CIO labor federation, citing the potential impact of buybacks on Bank of America.
Panel members also faulted the Making Home Affordable Program, saying the foreclosure mitigation effort funded with $50 billion in TARP money hasn’t met the Obama administration’s goal of aiding 3 million to 4 million homeowners.
“I am concerned,” said Senator Ted Kaufman, the Delaware Democrat who leads the panel. “Treasury cannot and should not prevent every foreclosure in this country, but it can and must do far, far better.”