Attorneys General and Regulators Force Banks to Clean Up Foreclosure Practices

By Kyle Chezum Updated on 4/13/2011

State attorneys general and financial regulators recently teamed up to tackle settlement negotiations with major banks over accusations of shoddy foreclosure practices.  Over the past several weeks, negotiations have dragged on, and few individuals and groups close to the proceedings have divulged much information about the state or direction of things.

Until now.  It seems the first portion of what looks to become a large, multifaceted settlement has become clear.  Regulators from the Office of the Comptroller of the Currency, the Federal Reserve and the Office of Thrift Supervision have announced that they will force consent orders on major banks to ensure that large financial institutions carefully reexamine their foreclosure procedures and resolve any procedural errors.  These orders will be given sometime later today, and are intended to bring about more large scale changes than those that banks have already undertaken on their own.

Many banks did, in fact, halt foreclosure operations last year when it became apparent that their methods were inadequate.  Regulators claim, though, that sweeping changes to foreclosure methodologies have not yet been implemented.

No financial penalties have yet been agreed upon.  Regulators and bank executives say the financial penalties will come later.  No timeline has yet been offered as to when these penalties will be established and enforced.