California Democrats call for investigation into loan modification and foreclosure practices

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California’s Democratic congressional delegation has joined the call for investigations into delays and possible irregularities in the loan modification and foreclosure process.

In a letter Wednesday signed by the California representatives and Speaker of the House Nancy Pelosi, the delegation said that constituents who have requested loan modifications or a forbearance of foreclosure have reported lenders ‘routinely fail to respond in a timely manner, misplace requested documents, and send mixed signals about the requirements that need to be met to avoid foreclosures.”

The letter -- which was addressed to U.S. Atty. Gen. Eric Holder, Federal Reserve Chairman Ben S. Bernanke and John Walsh, acting comptroller for the Office of the Comptroller of the Currency at the Treasury Department -- asks the agencies to ‘investigate possible violations of law.’

The action follows several recent announcements by some of the nation’s biggest lenders that they were halting evictions and some foreclosure proceedings due to possible mistakes in their processes. But these freezes are taking place outside of California in so-called judicial foreclosure states, where courts have jurisdiction over the process.

Nevertheless, the California delegation cited the recent foreclosure pauses in their letter, saying the moves by the lenders “amplify our concerns that systematic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures.”

-- Alejandro Lazo