By Vicki Needham - 10/13/10 10:29 PM EDT
The Federal Housing Finance Agency outlined new guidelines Wednesday for mortgage servicers as they investigate problems with their foreclosure procedures. FHFA provided a four-step plan that banks must follow as they look into paperwork problems such as flawed court papers and missing documents in homeowners' foreclosure files.
Edward DeMarco, acting director of the FHFA, directed Freddie Mae and Fannie Mac to implement the plan, requiring mortgage servicers to "review their processes and procedures and verify that all documents, including affidavits and verifications, are completed in compliance with legal requirements."
DeMarco also requested lenders to move as quickly as possible with foreclosures when no problems are found.
"This framework envisions an orderly and expeditious resolution of foreclosure process issues that will provide greater certainty to homeowners, lenders, investors and communities alike," he said in a statement today.
"The country’s housing finance system remains fragile and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and most of all, is in the best interest of taxpayers and housing markets.”
DeMarco said he consulted the Obama administration and several federal agencies in developing the plan.
Fannie and Freddie began working with their servicers earlier this month, asking banks to identify deficiencies within the foreclosure process, DeMarco said.
"Since then, additional mortgage servicers have disclosed shortcomings in their processes," he said.
Today's move comes shortly after officials in 49 states launched a joint probe today into the problems.
Several lenders have opted to freeze foreclosures in at least 23 states while they investigate potential problems, including Bank of America, which called for a halt in all 50 states.
The process in question is with "robo-signing," a procedure in which affidavits allowing banks to repossess homes that are in default aren't fully reviewed.
The White House opposes a nationwide moratorium on foreclosures, but congressional leaders, including Senate Majority Leader Harry Reid (D-Nev.) and Speaker Nancy Pelosi (D-Calif.), have called for a halt on foreclosures while investigations are ongoing. Reid's state is home to the country's worst housing crisis, and he faces a difficult re-election contest.
Senate Banking Chairman Christopher Dodd, (D-Conn.) has scheduled a hearing on the foreclosure problems for Nov. 16.