Bank executives are expecting to get an earful from lawmakers Tuesday when they defend themselves in front of the Senate Banking Committee against allegations they mishandled thousands of home foreclosures.
The banks’ likely defense — that the volume of foreclosures was so great that they were simply overwhelmed — is not likely to placate politicians looking to score points with struggling homeowners.
While the sputtering economic recovery has left far more people out of work than was expected, greatly hampering any recovery in the real estate market, bankers are nonetheless expected to concede that the foreclosure system is broken, and that they are working on ways to repair it. Part of the problem, the bankers will say, stems from the demands of investors — including Fannie Mae and Freddie Mac.
While few, if any, homeowners who are current on their mortgage payments have been ensnared in the foreclosure mess, allegations of “robosigning” of foreclosure documents have had the banking industry on its heels for weeks.
One of the witnesses tomorrow will be Iowa Attorney General Tom Miller, who is spearheading a probe of foreclosures practices on behalf of all 50 states. Executives from Bank of America, among others, will also be testifying.
People familiar with the situation think a settlement in the neighborhood of $1 billion is likely, and include a combination of loan modifications and fines. They also believe a settlement is on track for next month.