Oct. 26, 2010 -- A Treasury official will be on the hot seat tomorrow as a Congressional watchdog group, known largely for its scathing assessments of the federal bank bailout, will hold the first public hearing to tackle the foreclosure robo-signings scandal.
Tomorrow's hearing, by the Congressional Oversight Panel for the Troubled Asset Relief Program, was originally to focus on the government's foreclosure mitigation programs, including the Home Affordable Modification Program.
Now, COP spokesman Thomas Seay said, the panel will also hear testimony on how "robo-signed" affidavits -- foreclosure paperwork that allegedly was signed by employees who failed to properly review it -- could hurt the housing market and banks' bottom lines.
The panel will question Phyllis Caldwell, the Treasury Department's chief of the Homeownership Preservation Office, to learn how the administration is addressing the issue.
"Part of our mandate is to examine financial stability," Seay said. "As issues arise, we will adjust the work we're doing to incorporate them."
The Treasury Department did not immediately return a request for comment.
The robo-signing allegations are under investigation by state attorneys general, banking regulators and the administration's Financial Fraud Enforcement Task Force. The Department of Housing and Urban Development is also reviewing the issue as part of a broader investigation into whether mortgage servicers were complying with government mandates to offer loan modifications for mortgages backed by the Federal Housing Administration.
"[W]e remain committed to holding accountable any bank that has violated the law," White House Press Secretary Robert Gibbs said last week.
Concerns have been raised that the foreclosure paperwork scandal could further damage the long-ailing housing market. Federal Deposit Insurance Corp. Chairman Sheila Bair said this week that litigation resulting from the scandal could prolong "necessary and justified" foreclosures.
Foreclosure delays could stall the clearing of excess housing inventory that economists say is needed for the housing market to recover.
Banks themselves could also face harsh financial consequences. Bank of America, for instance, is already facing a possible lawsuit by investors, including the Federal Reserve Bank of New York, demanding that the bank buy back billions of dollars in mortgage securities.
"Banks on Wall Street continue to hold hundreds of billions of dollars in mortgage-backed securities, and the value of these securities depends in large part on investor confidence in the mortgage market," Seay said. "...Congress enacted the TARP in part to shore up bank balance sheets, and so we're deeply concerned by the possibility that banks may suffer losses related to their real estate assets."
The panel's hearing will come more than two weeks before a scheduled Senate Banking Committee hearing, called by Chairman Chris Dodd, D-Conn., on the foreclosure allegations. The committee has not yet announced who will testify at the Nov. 16 hearing.
The Congressional Oversight Panel was created by Congress in 2008 to oversee and assess the effectiveness of the bank bailout. Its reports have been largely critical of the government's execution of the bailout, with the panel most recently arguing that the Treasury Department's reliance on private contractors limited transparency -- a charge that the department refuted.