Officials Warn That Foreclosure Probes May Prove Inadequate

by Marian Wang
ProPublica, July 18, 2011, 12:41 p.m

Since flawed foreclosure practices by the nation’s biggest banks became last fall’s biggest scandal, federal bank regulators and the attorneys general of all 50 states launched simultaneous investigations <1>. But there are an increasing number of warnings that neither of those efforts have addressed the full scope of the problem.

Most notably, Elizabeth Warren, a senior Obama administration advisor, warned <2> about the ongoing probes in Congressional testimony last week: “I think there’s a real question about whether there’s been an adequate investigation.”

After news about fraudulent and missing mortgage documentation raised questions last fall about the legitimacy of foreclosure actions, all 50 states launched a joint investigation. A group of federal bank regulators launched a separate investigation. As we'd noted <3>, some observers had low expectations for the federal investigation all along, especially given the involvement of the historically bank-friendly <4> Office of the Comptroller of the Currency. But Warren herself had once expressed higher hopes <5> for the effort led by the states: "Right now my money is on the attorneys general," she'd told the L.A. Times last fall. Now nine months later, it seems she's not so confident about either.

Here’s where things stand. Federal bank regulators in April ordered the banks to submit plans for fixing their foreclosure and mortgage servicing practices, and those plans were submitted last week. (Read our rundown <6> explaining the order.) Some banks are still negotiating with regulators on how to conduct the required foreclosure reviews and which outside law firms will be allowed to assist. As the Wall Street Journal reported today <7>, regulators have questioned the independence of some outside firms, some of which had previously done consulting work for the banks or defended them in foreclosure suits. No fines <8> have yet been imposed on the banks.

http://www.propublica.org/blog/item/officials-concerns-that-full-scope-of-foreclosure-problems-exposed

Gee, who could have ever imagined that farming out foreclosure gate to the states was a bad idea? Or maybe, the best idea if your goal is foot dragging.