10.08.10

Whitehouse Calls on Attorney General to Investigate Foreclosure Scandal

Washington, DC – With Rhode Island and many other states still struggling to climb out of the foreclosure crisis, U.S. Senator Sheldon Whitehouse (D-RI) is calling on U.S. Attorney General Eric Holder to investigate reports of wrongdoing by mortgage servicers in foreclosure proceedings. 

“I ask that you launch a formal investigation of foreclosure practices at Ally Financial and other major loan servicers and that you vigorously prosecute those who have callously cut corners with foreclosures,” Whitehouse wrote to Holder.  “As foreclosure rates continue to increase nationwide, offenders must be brought to swift justice to deter future wrongdoing.” 

Last month, it was revealed that a manager at Ally Financial had ignored verification procedures before signing off on thousands of foreclosure documents.  The individual testified that he had failed to properly review cases, and had also ignored a requirement that he sign foreclosure documents in the presence of a notary.  Since then, a number of other mortgage servicers have also admitted to similar errors.  The admissions so far have been from large national mortgage companies that usually service mortgages that have been securitized and sold to numerous investors. 

Holder indicated yesterday that the Justice Department will review the allegations, but has not yet announced further investigative steps.

Yesterday, Whitehouse sent letters to the heads of Fannie Mae and Freddie Mac, as well as Fed Chairman Ben Bernanke, to ask that they halt foreclosures on mortgages that they hold or control.

The full text of Whitehouse’s letter to the Attorney General is below.

----------------------------------------------------

October 8, 2010

Eric H. Holder, Jr.

Attorney General of the United States

U.S. Department of Justice

950 Pennsylvania Avenue, NW

Washington, D.C. 20530

Dear Attorney General Holder:

I write to applaud your announcement that the Department of Justice is examining recent reports of wrongdoing by mortgage servicers and their agents in foreclosure proceedings.  With an estimated two million American families facing foreclosure this year, it is offensive to find these reports of reckless behavior in a process that can devastate the families involved.  Loan servicers should make every effort and take every care to avoid an outcome which may leave a family without a home.  In circumstances where no reasonable efforts can postpone an inevitable foreclosure, the homeowner deserves a respectful and supervised foreclosure process.  

I ask that you launch a formal investigation of foreclosure practices at Ally Financial and other major loan servicers and that you vigorously prosecute those who have cut corners with foreclosures.  As foreclosure rates continue to increase nationwide, offenders must be brought to swift justice to deter future wrongdoing. 

My state of Rhode Island leads our region in foreclosures, and I have seen firsthand the devastation that losing a home brings a family.  I have also seen how horrible the experience is for customers dealing with these big banks and servicers.  Foreclosure should be a final resort, to be exercised with care and only when reasonable efforts to modify mortgages fail.  Thank you for your prompt attention to this sensitive and urgent request.  I ask that you keep me apprised of your plans to investigate and prosecute foreclosure fraud. 

                                                            Sincerely,

                                                            Sheldon Whitehouse

                                                            United States Senator 

###