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HUD Inspector General’s Reports on Foreclosure Handling Process of Five Major US Banks

Philip R. Stein

In conjunction with its publication of the $25 billion settlement agreement, the Department of Housing and Urban Development’s Inspector General released separate reports detailing its investigation of foreclosure-handling practices at five major U.S.banks – JPMorgan, Wells Fargo, CitiMortgage, Bank of America and Ally Financial.  

The Inspector General’s reports confirm and detail the lengths to which these institutions went to violate state and federal foreclosure laws via robo-signing, foreclosing without proper documentation and with misidentification of the outstanding amounts owed by borrowers, forging documents and signatures, falsely notarizing paperwork and simply making up job titles.  It had already been well documented that illegal conduct occurred at these institutions, but what the reports illuminate is that such actions occurred at the direction of managers and executives at these banks.

Employees were evaluated on the volume of foreclosures they were able to complete, with statistics provided to employees measuring how fast they were generating affidavits, assignments and other foreclosure documents in comparison to their co-workers.  The banks incentivized employees to generate and process foreclosure documents at great speed and without due regard for the facts or the law. 

Additionally, the reports detail the extent to which each of the banks continued to hamper the HUD investigation even after the jig was up. The banks limited access to potential witnesses and employees, demanded that interviews be conducted only in the presence of bank attorneys, delayed or refused access to key information and generally interfered with the HUD investigators  to the extent feasible. 

“How could so many people have participated in this misconduct?,” the Inspector General, DavidMontoya, asked.  “The answer: simple greed.” 

Some of the banks have responded to the HUD IG’s reports by stating that such managerial and procedural “deficiencies” have now been corrected.  Unfortunately, one has to question whether these banks’ “moral compass” is any more operative than Goldman Sachs’ as depicted by departing employee Greg Smith in his much-acclaimed New York Times op-ed piece.

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