NEW YORK ( TheStreet) - Top bank executives sought to characterize the "robosigning" issue as a minor blip in recent days - even though it's resulted in investigations by state and federal government and the delay of hundreds of thousands of foreclosures.
The mortgage industry is dominated by a handful of large servicers. Bank of America (BAC - Get Report), Wells Fargo (WFC - Get Report), JPMorgan Chase (JPM - Get Report), Citigroup (C - Get Report) and GMAC Mortgage are the biggest players; combined with a handful of regional servicers like U.S. Bancorp (USB - Get Report) and PNC Financial Services (PNC - Get Report), they leave a slim margin for others to compete.
The tidal wave of foreclosure filings has incentivized those firms to push defaulted borrowers through the system as quickly as possible. In what appears to be a systemic issue, employees and outside contractors had signed off on thousands of documents under oath without verifying all the information within properly.
This so-called "robosigning" issue erupted earlier this month, when Ohio Attorney General Richard Cordray filed suit against GMAC Mortgage, seeking $25,000 for each faulty foreclosure document, along with undefined restitution for affected consumers. Eventually, all 50 attorneys general combined forces to investigate the situation, as did the Office of the Comptroller of the Currency. Several big servicers implemented foreclosure freezes or began detailed reviews of processes and paperwork to ensure they were in compliance.During third-quarter conference calls over the past two weeks, top executives provided some clarity on the "robosigning" situation - where things stand, how exposed they are to the issue and how long it will take for investigations to get cleared up: