Audit Finds Problems with California Foreclosures

Published February 16, 2012, 11:14 a.m. EST

Updated February 16, 2012, 10:14 a.m. EST

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Law and regulation

That $25 Billion Settlement? It's Just the Beginning

Multiple state and federal officials put the banks on notice that the $25 billion mortgage servicing settlement is just the first step in pursuing civil litigation and criminal prosecutions in connection with misdeeds before, during and after the financial crisis.

By Kate Davidson

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Law and regulation

Details Emerge on $25B Mortgage Settlement

State and federal authorities held a press conference to announce a $25 billion settlement with the five largest mortgage servicers, and provided key details on how the money was being distributed and the amounts each institution is expected to pay.

By Joe Adler and Kate Davidson

February 9

A week after state attorneys general reached a landmark settlement with the country's five largest mortgage servicers over their foreclosure practices, a new report has emerged that illustrates just how flawed the foreclosure process has become.

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The report, released Wednesday, examined 382 foreclosures in California between January 2009 and October 2011 and found at least one irregularity in 99% of them. Aequitas Compliance Solutions Inc., which conducted the study for San Francisco's Office of the Assessor-Recorder, also found one or more clear violations of law in 84% of the loans.

The results of the study were first reported by the New York Times. Problems identified in the study ranged from lenders failing to file a notice of default to concerns regarding the assignment of the deed of trust. Overall, 82% of the loans had evidence of at least one suspicious activity, which included incorrect parties claiming to be the beneficiary of the deed of trust, back-dating of documents and incorrectly executed documents.

The report stated California's process for handling foreclosures allowed for little oversight as lenders can sell foreclosed homes without court approval.

The report also said that last week's $25 mortgage settlement does not resolve many of the problems uncovered in this audit and does not provide lenders and servicers with immunity for potential liabilities.