Fed Official Calls For Major Foreclosure Reforms

A top federal regulator told bankers on Friday that a major investigation into Wall Street's foreclosure system has revealed a "broken" process that takes advantage of homeowners, further intensifying the debate over regulatory remedies to potential foreclosure fraud.

Mortgage companies have been accused of submitting fraudulent paperwork in the foreclosure process, prompting a brief suspension of foreclosures by several major servicers in the fall. This spectacle has undermined public faith in President Barack Obama's signature foreclosure-relief effort, the Home Affordable Modification Program, which relies on servicers to implement all of its critical components. The National Consumer Law Center estimates that half of the foreclosure cases it takes on are driven by improper actions by mortgage servicers, rather than fundamental problems with a borrower's ability to pay off a mortgage.

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