Senators on Tuesday pressed Bank of America Corp. and JPMorgan Chase & Co. to halt a "dual-track" process in which struggling borrowers being considered for loan modifications can sometimes face foreclosure proceedings.
"Homeowners are completely confused and stressed by these foreclosure notices," Sen. Jeff Berkley, D-Ore., said at a Senate Banking Committee hearing in Washington.
The official leading an investigation of foreclosure practices at major banks said he's looking to reach a settlement with servicers that would include a provision cracking down on the practice. Iowa Attorney General Tom Miller told the panel that state attorneys general are having "productive" talks but a final agreement could take "months."
In her testimony, Bank of America mortgage executive Barbara Desire said that in some cases, investors that own mortgages require the dual-track approach. But she said the bank is interested in talking with state attorneys general about ways to reform the practice. She repeatedly said the bank focuses on finding ways to keep homeowners in their homes where possible.
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JPMorgan executive David Lowman said that under the government's HAMP program, modifications have to be considered before foreclosures take place. He said modifications and foreclosures can proceed on parallel paths at JPMorgan, but the bank suspends foreclosure sales when applications are pending.
Tuesday's hearing was spurred by allegations that banks have used so-called "robot-signers" to improperly review documents used in foreclosures, leading to foreclosure halts at Bank of America and other lenders. Those concerns have led to deeper questions about how banks handle mortgage paperwork, especially at a time when mortgages are often packaged into pools and sold off to investors.
"Many believe that the robo-signing errors are simply the tip of a much larger iceberg, that they are emblematic of much deeper problems in the mortgage servicing business, problems that have resulted in homeowners losing their homes in unjustifiable foreclosures," Sen. Chris Dodd, D-Conn., the committee's chairman, said.
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