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General freeze on home seizures sought

Amid growing questions about banks' handling of foreclosures, consumer and civil rights groups call for a national moratorium.

October 08, 2010|By Alejandro Lazo and E. Scott Reckard, Los Angeles Times

Amid escalating foreclosures and fresh questions about how they're being conducted, a coalition of consumer and civil rights groups has called for a national freeze on all bank seizures of homes.

The action came as President Obama declined to sign foreclosure-related legislation because of the "unintended impact of this bill on consumer protections, including those for mortgages," White House communications director Dan Pfeiffer said Thursday.

The call for a freeze follows growing disclosures of alleged irregularities, including mishandling of records in the foreclosure process, by lenders. Three major banks have already suspended foreclosures, but only in the 23 states that process foreclosures through courts. (California is not among them.) In calling for a national freeze, the advocacy groups said that foreclosures unfairly target minority communities and tear apart neighborhoods.

"This information about inaccurate records compounds an already existing problem," said Hilary O. Shelton, director of the National Assn. for the Advancement of Colored People's Washington Bureau. "There needs to be an opportunity for people to find other options to save their homes, and the beginning of that is to stop the foreclosures."

Banks have been repossessing homes at a record clip this year, pushing many properties through a process that had been delayed last year by several moratoriums as well as by the Obama administration's efforts to help troubled borrowers.

Paul Leonard, California director of the Center for Responsible Lending, said admissions by some lenders that they had inappropriately handled paperwork was evidence that banks were not adequately staffed to work with defaulting homeowners.

The large lenders, he said, were not prepared to process foreclosures fairly. "A moratorium would provide some time to review existing cases, build the infrastructure that they need and hopefully result in more borrowers being considered for sustainable and affordable loan modifications," Leonard said.

Also, Rep. Edolphus Towns (D-N.Y.), chairman of the House Committee on Oversight and Government Reform, on Thursday called on lenders to voluntarily suspend foreclosures until they complete internal investigations.

But a representative for the banking industry said a moratorium could delay a recovery in the housing market.

"We have concerns with broad-based moratoriums," said Scott Talbot, senior vice president for government affairs at the Financial Services Roundtable, a lobbying group for banks, brokerage firms and insurers. "Foreclosures should be processed in a timely manner. Delays hinder the community, the housing market, and the economy."

So far three of the nation's biggest lenders — JPMorgan Chase & Co., Ally Financial Inc. and Bank of America Corp. — have halted foreclosures in 23 states where courts have jurisdiction over the process. But Talbot said that the issues in those cases were largely procedural, and that bank officials had indeed verified that borrowers were in default and unable to meet even modified loan payments.

"The issue here is technical in nature," Talbot said. "It's not about the substance of the borrowers' files."

The call for a national moratorium came as the president said Thursday that he would not sign the Interstate Recognition of Notarizations Act of 2010, which was conceived to facilitate interstate commerce. Consumer groups and state officials across the country had complained that the bill would make it harder for homeowners to challenge foreclosure documents prepared in other states.

"We believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized," Pfeiffer wrote on the White House's blog.

Meanwhile, lenders are coming under increasing pressure in California to halt foreclosures.

Two advocacy groups — the Los Angeles-based Alliance of Californians for Community Empowerment and the Greenlining Institute of Berkeley — this week called for a foreclosure moratorium.

The L.A. group said it was forming a separate organization, the Home Defenders League, to help homeowners fight foreclosures. Both groups called on Atty. Gen. Jerry Brown to support a moratorium.

Brown has ordered Chase and Ally to suspend California foreclosures until they prove to his office that they are complying with state law. His staff is in discussions with the lenders.

"It's been cooperative so far," Jim Finefrock, a Brown spokesman, said.

alejandro.lazo@latimes.com

scott.reckard@latimes.com

Times staff writer Jim Puzzanghera in Washington contributed to this report.

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