The joint investigation by all 50 state attorneys general into mortgage servicing will go beyond alleged incidents of robo-signing, Iowa Attorney General Tom Miller told the Senate Banking Committee Tuesday.
The investigation, announced in October, involves state bank and mortgage regulators in addition to the state AGs. According to prepared testimony from Miller, the biggest issue facing servicers is a broken loan modification system.
‘In many ways, there is not currently a coherent loss mitigation system,’ Miller said. ‘Instead, there exists a system of Russian roulette where whether or not a borrower receives a modification that will save the family home depends, in large part, on who picks up the phone on the other end.’
Miller also said that the arguments that discount robo-signing as a technicality show ‘a certain type of arrogance.’ The mortgage industry has noted that the discovery of procedural flaws does not negate the fact that borrowers are behind on their mortgage.
‘Such statements miss the point entirely,’ Miller said. ‘We do not say in a criminal prosecution that it is OK for the prosecutor to fabricate evidence, so long as the defendant is, in fact, guilty. The outrage over robo-signing is about due process, protection of private property rights and the rule of law.’
Major servicers that have paused foreclosures in order to review their procedures maintain that no improper foreclosures have resulted from issues related to affidavits flaws.
In written testimony also prepared for Tuesday's committee hearing, executives from Bank of America and Chase note that the basis for their foreclosure decisions have been accurate.
‘It is important to note at the outset that the issues that have arisen in connection with foreclosure proceedings do not relate to whether foreclosure proceedings were appropriately commenced,’ said David Lowman, CEO of Home Lending at JPMorgan Chase. ‘We have not found errors in our systems or processes that would have led foreclosure proceedings to be commenced when the borrower was not in default.’
Still, others point out that examples of affidavit mistakes and notary abuse cast a long shadow over servicers' good-faith efforts to help distressed borrowers. At the National P&P Conference this week in Washington, D.C., Laurie Maggiano, director of policy at the U.S. Treasury's Homeownership Preservation Office, called reports of robo-signing ‘damaging’ to servicers' attempts to date at modifying loans.