–Average Time to Foreclosure Now 440 days, Up from 251 Days

By Ian McKendry

WASHINGTON (MNI) – Federal Reserve Gov. Elizabeth Duke is warning
Congress that processing flaws, for foreclosures and mortgage
modifications and more, need to be fixed and the Fed is doing its part.

“Flaws in the foreclosure process have the potential to delay
recovery in housing markets and to undermine confidence in our financial
and legal systems,” Duke says in her prepared remarks that were released
Wednesday afternoon.

“The Federal Reserve has been actively working to mitigate the harm
to consumers and markets caused by problems in mortgage loan
origination, securitization and loan foreclosures,” Duke said.

Federal Reserve Chairman Ben Bernanke announced on October 25, the
Fed along with other federal regulators would conduct reviews of the
nations largest mortgage servicers on their mortgage servicing processes
after it came to light there may have been legal flaws in their
processes.

Duke said the Fed along with the Office of Comptroller of Currency,
the Office of Thrift Supervision, and the Federal Deposit Insurance
Company hope to complete their on-site investigation by the end of the
year, and report their findings on industry wide servicing practices by
early 2011.

In her testimony Duke also says the mortgage modification process
needs to be improved, saying “it is imperative that mortgage lenders and
servicers provide borrowers every opportunity to modify the loan and
retain their homes.”

“If that is not possible and foreclosure becomes necessary, that
they give borrowers all the protection afforded by following due process
as required by law,” she added.

Duke said in cases where “actual problems” with a loan are
discovered, regulators will require lenders and servicers to correct not
only specific issues, but also revamp their systems to prevent further
problems.

John Walsh, the acting comptroller of the currency of the OCC who
is also testifying Thursday said in remarks that he prepared that
lenders and servicers have not met the standards they expect from them.

“The lapses that have been reported represent a serious operational
breakdown in foreclosure governance and controls that we expect national
banks to maintain,” Walsh said.

“These lapses are unacceptable, and we are taking aggressive
actions to hold national banks accountable, and to get these problems
fixed,” Walsh added.

Walsh said as a regulator, their objective is to make sure bank
self-assessments and corrective actions are adequate, to make sure all
legal requirements and affidavit claims are accurate, and to make sure
borrowers are considered for mortgage modification before foreclosure
action is taken.

“HAMP [Home Affordable Modification Program] guidelines now
preclude the servicer from initiating a foreclosure action until the
borrower has been determined to be ineligible for a HAMP modification,”
Walsh said.

Walsh also said it is imperative lenders and servicers have the
capacity to deal with the surge problem loans and to take into account
any extra capital that may be needed to account for future losses due to
such loans.

“Regardless of whether a loan is modified or not, we expect banks
to maintain systems to identify problem assets, estimate incurred credit
losses for those assets, and establish loan loss reserves and/or
initiate write-downs sufficient to absorb estimated losses,” Walsh said.

Duke said recent estimates suggest that the average time to
foreclosure in the United States has increased from 251 days in January
2008 to more than 440 days in 2010, and that there may be 4.25 million
more foreclosure filings by the end of 2012.

** Market News International Washington Bureau: 202-371-2121 **

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