gao home mortgage defaults and foreclosure and race

To help homeowners, neighborhoods, and communities address the negative effects of abandoned foreclosures, the Comptroller of the Currency and the Chairman of the Board of Governors of the Federal Reserve System should require that the mortgage servicers they oversee notify borrowers when they decide to charge off loans in lieu of foreclosure and inform borrowers about their rights to occupy their properties until a sale or other title transfer action occurs, responsibilities to maintain their properties, and their continuing obligation to pay their debt and taxes owed.

This guidance states that if OCC-supervised entities acting as mortgage servicers decide to forgo foreclosure and release the lien on a property, those institutions should notify, or attempt to notify, the borrower (1) of the decision to forgo foreclosure and release the lien, (2)that the borrower may continue to occupy the property, and (3) that the borrower is obligated to maintain the property and pay property taxes. On December 14, 2011, the Office of the Comptroller of the Currency (OCC) released guidance on foreclosed properties to national banks, federal savings associations, and their examining personnel (OCC 2011-49). OCC did not comment on the recommendations. The Federal Reserve neither agreed nor disagreed with these recommendations. Among other things, GAO recommends that the Federal Reserve and Office of the Comptroller of the Currency (OCC) require servicers they oversee to notify borrowers and communities when foreclosures are halted and to obtain updated valuations for selected properties before initiating foreclosure. GAO also interviewed representatives of federal agencies, state and local officials, nonprofit organizations, and six servicers, among others, and reviewed federal banking regulations and exam guidance. GAO analyzed servicer loan data from January 2008 through March 2010 and conducted case studies in 12 cities. GAO was asked to assess (1) the nature and prevalence of abandoned foreclosures, (2) their impact on communities, (3) practices that may lead servicers to initiate but not complete foreclosures and regulatory oversight of foreclosure practices, and (4) actions some communities have taken to reduce abandoned foreclosures and their impacts. These abandoned foreclosure-or 'bank walkaway'-properties can exacerbate neighborhood decline and complicate federal stabilization efforts.

Entities responsible for managing home mortgage loans-called servicers-may initiate foreclosure proceedings on certain delinquent loans but then decide to not complete the process.

Gao home mortgage defaults and foreclosure and race