WASHINGTON — A group of House Democrats, including Financial Services Committee Chairman Barney Frank and Rep. Brad Miller, D-N.C., are calling on regulators to conduct another round of stress tests due to foreclosure irregularities.
The lawmakers specifically asked regulators to examine securitized pools of mortgages.
"Stability issues that have not been included in previous stress tests include liabilities for breaches of representations and warranties in Pooling and Servicing Agreements, liabilities arising from systemic mortgage documentation irregularities, and conflict of interests for servicers affiliated with firms that hold significant portfolios of second liens," the letter said. "We urge the council to recommend that its members conduct specific, thorough reviews of the potential effects of these issues on the risk profiles of the institutions they regulate."
The letter, which is to be delivered to Treasury Secretary Tim Geithner and members of the Financial Stability Oversight Council on Friday, also asks that the council to consider "requiring that some financial companies divest affiliates involved in servicing securitized mortgages."
The letter also asks regulators to review collateral loan files and to consider conflicts of interest that arise from servicers who hold second liens.