Public Pension Fund Coalition Urges Thorough Foreclosure Review by US Banks

(January 10, 2011) — A coalition of public pension funds headed by New York City Comptroller John Liu and representing more than $430 billion in assets has asked the boards of four of the largest US banks to review their mortgage and foreclosure practices, calling for the banks to report the findings of their independent examinations in their 2011 proxy statements this spring.

The review highlights the mounting influence of public pensions nationwide in pressuring banks to heighten their standards and level of transparency following the financial crisis. The coalition includes the Connecticut Retirement Plans and Trust Funds, the Illinois State Board of Investment, the Illinois State Universities Retirement System, the New York State Common Retirement Fund, the North Carolina Retirement Systems, and the Oregon Public Employees Retirement Fund.

According to Reuters, the coalition of seven major public pensions urged the Audit Committees of Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, and Wells Fargo L& Co to increase the scrutiny they allot to their loan modification, foreclosure, and securitization policies and procedures. The coalition has a total of $5.7 billion invested in the four banks. “This will help to prevent future compliance failures and restore the confidence of shareholders, regulators, legislators and mortgage markets participants,” the coalition said in the letter, as reported by the news service.

Just last week, the Supreme Judicial Court of Massachusetts’ voted unanimously to void the seizure of two homes by Wells Fargo & Co and US Bancorp on the grounds that the foreclosures were completed without proper documentation. “We agree with the [Land Court] judge that the plaintiffs…failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,’’ Justice Ralph Gants wrote in the decision, reported the Boston Globe.

The ruling may exert a greater push on major US lenders to prove they own a mortgage before foreclosing. Already, around the country, attorneys general are looking into whether lenders are improperly forcing people into foreclosures.

“There is a fundamental problem in the banks’ procedures that endangers not just homeowners, but shareholders, and local economies,” New York City comptroller Liu said in a statement.