In the past couple of years, many allegations of wrongful foreclosure practices (such as robo-signing) have been leveled against banks and mortgage service companies. Wrongful foreclosure practices are a very serious matter. Such practices can cause a great deal of harm to homeowners.
Thus, an important question arises: what is the federal government doing in response to the above-mentioned allegations?
Recent reports indicate that one of the answers to this question is: fining banks. Last month, the Federal Reserve announced that it would be fining five large banks in connection to allegations of wrongful foreclosure practices. Reportedly, these fines were part of a settlement these five banks reached with the federal government and state governments. The total amount of these fines reportedly exceeded $700 million.
Now, this month, the Federal Reserve has announced that it will be fining an additional eight banks in connection to allegations of wrongful foreclosure practices. According to the article on the Wall Street Journal’s website which reported this story, as of March 12, the Federal Reserve had not given any information regarding what the amount of these fines would be.
Some interesting questions arise in regards to these announced fines. What effects will these fines have on the behavior of banks and mortgage service companies regarding foreclosures? Will fines like the ones announced prove to be an effective deterrent to banks and mortgage service companies committing wrongful foreclosure practices? Will these fines ultimately have positive impacts? It will be interesting to see how these questions are ultimately answered.
Source: The Wall Street Journal, “Fed Plans to Fine Eight More Banks for Foreclosure Violations,” Alan Zibel, March 19, 2012