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Federal Government Broadens Probe Into Foreclosures

The federal government is intensifying its probe into the banking industry's foreclosure practices. The Justice Department is involved. The Justice Department Trustee Program is stepping up its efforts to review Chapter 13 bankruptcy cases for improprieties in foreclosure proceedings that led to the Chapter 13 filing.

Cincinnati bankruptcy attorneys know that many distressed homeowners can halt a foreclosure process through filing for bankruptcy. A Chapter 13 bankruptcy can sometimes allow a homeowner to remain in the home and make up mortgage arrearages over the course of the Chapter 13 bankruptcy plan.

The Wall Street Journal reports that a U.S. official says that 17 federal Trustee offices have intensified their review of Chapter 13 bankruptcy filings. The Trustees are reviewing the filings for foreclosure documentation errors and other improprieties, including excessive fees.

The banking industry has been under scrutiny at the state and federal levels over allegations earlier this year regarding so called "robo-signers" that submitted affidavits without reviewing the files. The attorneys general from all 50 states, including Ohio, initiated probes earlier this year.

At the federal level Associate Attorney General Thomas Perrelli is coordinating efforts across several federal agencies, including the Treasury Department and the Securities and Exchange Commission. The Federal Housing Administration has also launched its own probe into the banking industry's methods of processing mortgage payments.

The U.S. Trustees are focusing primarily on the proofs of claim filed by mortgage servicers in Chapter 13 bankruptcy filings. The Trustees official are scrutinizing the paperwork to ensure servicers are not inflating claims and are not improperly resuming foreclosure proceedings during the bankruptcy process.

Source: Wall Street Journal, "U.S. Looks Deeper Into Foreclosures," Evan Perez, Damian Paletta, 26 Nov 2010

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