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Asian Journal: California officials demand foreclosure moratorium

October 8, 2010
In The News

by Joseph Pimentel

California Assemblymember Ted Lieu (D-CA) and Congresswoman Maxine Waters (D-CA) are seeking a moratorium on foreclosures from banks while also calling on state and federal regulators to investigate them for possible illegal and improper actions.

Recently, banks like Ally Financial's GMAC mort-gage unit and JP Morgan Chase's mortgage unit both revealed that employees had signed and fi led thousands of affi davits in order to foreclose on properties without giving them appropriate review.

Bank of America has also suspended thousands of foreclosure proceedings amid questions about its ac-tivities, said Waters, who is also asking other banks in-cluding Citigroup, HSBC, PNC, US Bancorp and Wells Fargo to suspend foreclosures until they can thoroughly review their procedures.

"It appears that some major mortgage servicers pro-cessed tens of thousands of documents a month to rush to foreclose on properties, and it is likely that many families wrongly lost their homes as a result," said Con-gresswoman Waters, who represents parts of South Los Angeles. "This should not happen, and we must not tol-erate such actions."

Lieu is asking the California Department of Financial Institutions and Department of Corporations to insti-tute a 60-day temporary foreclosure moratorium citing evidence that shows executives at mortgage compa-nies certifying anywhere between 10,000 and 18,000 foreclosure documents a month without reviewing the documents or having any personal knowledge of what was contained in the documents.

"These lenders, as well as other major lenders, should institute a foreclosure moratorium in California, which is one of the nation's hardest hit states in sheer numbers of foreclosures," said Lieu.

Lieu said California has two laws that require lenders to certify action before they can foreclose on a home. SB 1137, which Lieu co-authored and was signed by Governor Arnold Schwarzenegger in 2008, requires lenders/mortgage servicers to contact the borrower and discuss with the homeowner various options to avoid foreclosure, said Lieu. The lender then has to wait 30 days or must prove its due diligence with working with the borrower before filing a no-tice of default.

The other California law is the California Foreclosure Prevention Act requires lenders to certify they have comprehensive loan modification programs or else be subject to a 90-day foreclosure moratorium.

California Attorney General Jerry Brown has issued two letters to JP Morgan Chase and Ally Financial requesting that they prove they are complying with California law before they institute foreclosure actions and the California House Democratic Con-gressional Caucus also sent a letter to US Attorney General Eric Holder re-questing a criminal investigation of mortgage lenders based on a large volume of evidence suggesting laws may have been violated, according to Lieu.

"Fitch Ratings has stated that what is going on is an industry-wide prob-lem and practice on Wall Street," said Lieu.

Waters was among 31 Democratic Representatives from California who sent letters to the Justice Department, the Federal Reserve and the Office of the Comptroller of the Currency urging them to "investigate possible violations of law or regulations by fi-nancial institutions in their handling of delinquent mortgages, mortgage modifications and foreclosures."

"Democrats in Congress passed legislation to reform Wall Street and protect consumers, and we will hold mortgage servicers and other finan-cial institutions accountable," said Waters, who is the chairwoman of the Housing and Community Opportu-nity Subcommittee. "I will continue to hold hearings and advance legislation that helps homeowners."