Federal Reserve Chairman Ben S. Bernanke said the central bank and other regulators are examining financial firms’ home-foreclosure practices “intensively” and expect preliminary findings next month.
“We have been concerned about reported irregularities in foreclosure practices at a number of large financial institutions,” Bernanke said today at a housing conference in Arlington, Va. “We are looking intensively at the firms’ policies, procedures, and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures.”
Ally Financial’s GMAC Mortgage unit, JPMorgan Chase & Co., and Bank of America Corp. are among loan servicers that temporarily halted foreclosures while the companies review paperwork. Court documents have showed that employees might have submitted affidavits without confirming their accuracy, a practice that state officials say could amount to fraud.
“We take violations of proper procedures seriously,” Bernanke said in the prepared text of welcoming remarks to the conference on mortgages and housing finance, hosted by the Fed and Federal Deposit Insurance Corp.
Bernanke didn’t comment on the outlook for the economy or monetary policy, eight days before the Fed meets to decide on what economists and investors expect will be a plan to boost growth by restarting large-scale securities purchases. After discussing foreclosures, he devoted much of his remarks to the Fed’s housing-market efforts, such as studies, conferences and events serving troubled borrowers.
“More than 20 percent of borrowers owe more than their home is worth, and an additional 33 percent have equity cushions of 10 percent or less, putting them at risk should house prices decline much further,” Bernanke said. “With housing markets still weak, high levels of mortgage distress may well persist for some time to come.”
Housing markets were weak in September and early October, with sluggish or declining sales in many regions, the Fed said in its Beige Book business survey last week. There were “scattered reports of some improvement.”
“Respondents’ outlooks suggested sales and construction would remain subdued through year-end,” restrained in part by lending standards and “general economic uncertainty,” the Fed said.
Data released this month showed that builders in the United States began work on more homes in September than economists expected, with housing starts at a 610,000 annual rate. Still, that’s less than one-third of the record 2.3 million pace in January 2006.
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