Panel to Look at Foreclosure Practices

NEW YORK -- A Senate subcommittee plans a hearing next week to investigate whether mortgage lenders are abusing the bankruptcy court system and deepening the foreclosure crisis by levying dubious fees on troubled borrowers or moving to seize their homes improperly, The New York Times reported Tuesday.

Sen. Charles E. Schumer, chairman of the Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts, said he hoped the hearing on May 6 would lead to legislation intended to protect borrowers from abusive practices, the paper reported.

“What the hearing is going to show is what an ongoing, awful enterprise some of these companies ran, not just taking advantage of the terms of the mortgage, but when they control the mortgage how they continue to squeeze and squeeze and squeeze,” Schumer, D-N.Y., said.

In its investigation, the subcommittee will interview Clifford J. White III, director of the executive office for the United States Trustee, and Katherine M. Porter, an associate professor of law at Iowa University and author of a comprehensive study on lenders’ practices in bankruptcy. Porter’s analysis of 1,733 foreclosures in 2006 found that questionable fees were added to borrowers’ bills in almost half the loans, the pape reported.

The news comes as the number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, a research firm said Monday, according to The Associated Press.

Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said, according to the AP.

Meanwhile, Bank of America will expand efforts to help Countrywide Financial borrowers avoid foreclosure on troubled mortgages, a top bank executive said Monday, the AP reported.

The announcement came as members of the Federal Reserve Board convened two days of public hearings on Bank of America’s proposed $4.1 billion stock deal for Countrywide, based in Calabasas, Calif., the AP reported

Also, Countrywide said it lost $893 million during the first quarter due to a sharp increase in its provision for loan losses, the AP reported.

-- NYSSCPA.org News Staff

Posted on 4/29/08