While conceding that major flaws exist in servicers' loss mitigation practices, foreclosure missteps – such as shoddy paperwork – are ‘not a systemic problem that cuts across all servicers,’ according to U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan.
Donovan's comments came after 10 federal agencies, including HUD, met in Washington, D.C., Wednesday to address not only issues relating to improper affidavits, but also broader concerns about servicer noncompliance. Donovan told reporters Wednesday that the Federal Housing Administration has been investigating its servicers' loss mit and foreclosure practices for five months.
In an interview with Jim Lehrer of PBS' NewsHour, Donovan said the Obama administration and federal agencies are focusing, in part, on how well servicers are working with distressed borrowers in the early stages of default management.
‘We do have concerns that we're seeing not just mistakes on paperwork, but issues around servicers' not doing what they should be doing to help keep people in their homes,’ he told Lehrer, specifying examples of servicers not contacting borrowers by phone prior to foreclosure.
Among those in attendance in D.C. Wednesday were Treasury Secretary Tim Geithner and Associate Attorney General Tom Perrelli, according to White House Press Secretary Robert Gibbs. The Justice Department's Financial Fraud Enforcement Task Force is among the agencies probing servicers' practices, and Donovan indicated in the PBS interview that federal law enforcement is coordinating efforts with state attorneys general. All 50 state AGs announced a joint investigation into servicing last week.
‘We support what the AGs are doing becauseâ�¦obviously a lot of applicable foreclosure law is done at a state level,’ Gibbs said at a press briefing Wednesday.
Although Donovan said servicers that identify procedural flaws should voluntarily impose foreclosure moratoria, he emphasized the administration's viewpoint that valid foreclosures ought to move through the system. Those cases that are impacted by flawed affidavits at the very end of the foreclosure process are oftentimes in relation to vacant homes or borrowers who are deeply in arrears, he told PBS.
‘We want to make sure we're working with servicers earlier in the process and that they're fixing any problems in the process further upstream, where you actually have a more significant chance of keeping somebody in their home,’ Donovan said.
The law enforcement agencies involved with the investigations are still deciding whether criminal issues exist.
‘That is a narrow set of the issues, if there is willful or fraudulent conduct,’ Donovan said.
Donovan said that foreclosure problems are evident at particular institutions, although he did not name specific servicers. Foreclosures that occur without servicers having clear, legal authority are a ‘serious problem,’ Donovan said. ‘I think that behavior is shameful.’