Lawmakers Call for Hearings After Mortgage Robo-Signings Continue

The mortgage industry is coming under fire again after lawmakers and enforcement agencies received word that robo-signings have continued. Numerous major mortgage servicers came under fire in 2010 after it was revealed they were utilizing this illegal practice to speed up the foreclosure process.

Robo-Signing Continues in Mortgage Industry

Lawmakers and law enforcement agencies alike are responding to the surprising news that mortgage servicers have continued robo-signing mortgages despite being reprimanded last year for this illegal act.

Robo-signing during the foreclosure process means that the servicer doesn’t provide notary public-verified sworn affidavits that show the trust owns the mortgage. Instead, they generate their own documents for submission that haven’t been validated.

The discovery of robo-signings in 2010 revealed numerous homeowners had been foreclosed on illegally. In turn, lawmakers called for a foreclosure freeze and have even required servicers to repay borrowers and the housing industry for the issue through loan modifications and other settlements.

After servicers promised they would stop the act, many assumed the issue would end. But on Monday, The Associated Press reported that county officials in at least three states (Massachusetts, North Carolina and Michigan) say they’ve received thousands of mortgage documents with questionable signatures since last fall.

Lawmakers Want Answers from Servicers

On Tuesday, Sen. Sherrod Brown (D-Ohio) who is the chair of the Financial Institutions and Consumer Protection Subcommittee, said the subcommittee will be holding a hearing on the robo-signing issue in the very near future.

He expressed disappointment that Wall Street and some in Washington had not stopped the process. He explained that they’d promised they would stop the practice, “But the same risky practices that put our economy on the brink of collapse continue to infect the housing market.”

Rep. Maxine Waters (D-Calif.), a senior member of the House Committee on Financial Services, said the lenders will “need to be investigated and prosecuted.” She also noted that regulators need to step in and stop the action since lenders “have complete disregard for the damage they have already caused and have no intention of changing their ways.”

She criticized the Office of the Comptroller of the Currency (OCC), the main federal regulator for banks, for not doing enough to control the servicers. A spokesman for the OCC said the 14 largest national banks had submitted action plans that would address how they would resolve issues like robo-signing. As of last week, the OCC is said to be reviewing those plans.