Regulators at odds over penalties for mortgage fraud abuse

March 03, 2011 01:30PM

Disagreements are underway in Washington over how much to punish the banks involved in mortgage fraud abuse and over who should benefit from a settlement, the New York Times reported. The newly created Consumer Financial Protection Bureau is pushing for $20 billion or more in penalties, a measure which is supported by the attorneys general and the Federal Deposit Insurance Corporation. But other regulators, including the Office of the Comptroller of the Currency, which oversees national banks, and the Federal Reserve, do not favor such a large fine, contending that a small number of people were the victims of flawed foreclosure procedures. As negotiations continue, there are signs that the banks still have not addressed the problems plaguing the foreclosure process, which were revealed last fall with the robo-signing controversy. Some banks suspended foreclosures to review their processes before resuming. “The events of the fall really uncovered and provided a degree of focus on fundamental problems in the way banks service and foreclose on mortgages,” said Paul Leonard of the Center for Responsible Lending. “Regulators have a great opportunity to come up with some serious fixes.” However, regulators first need to agree on a figure for a broad settlement and decide what to do with the money. All the regulators declined to comment publicly on how close they were to reaching a final decision. [NYT]