Litigation arising from foreclosure paperwork problems could be “very damaging” to the housing market, a top U.S. banking regulator said Monday.
Federal Deposit Insurance Corp Chairman Sheila Bair said she did not believe legislation would be needed to address concerns over whether the paperwork was properly done so long as investigations show the issue was mostly “procedural.”
State and federal officials are investigating allegations that for years banks have not reviewed foreclosure documents properly or have submitted false statements to evict delinquent borrowers.
“I fear that the litigation generated by this issue could ultimately be very damaging to our housing markets if it ends up unduly prolonging those foreclosures that are necessary and justified,” Bair told a housing conference in Arlington, Virginia.
“The regrettable truth is that many of the properties currently in the foreclosure process are either vacant or occupied by borrowers who simply cannot make even a significantly reduced payment and have been in arrears for an extended time.”
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