Md. Democrat wants to reopen deals PNC, other banks made to settle claims over foreclosure practices
PNC Bank paid $69.4 million last year to settle allegations of abusive foreclosure practices, but one member of Congress believes the bank and a dozen others that serviced loans probably owe more.
The top Democrat on the House Oversight Committee, Rep. Elijah Cummings, D-Md., said an independent review of 4,800 PNC loans revealed errors in 24 percent of the cases and “financial injury” to borrowers in more than a fifth of the loans.
The review might have yielded even more mistakes, but it was cut short when federal regulators chose to settle with the banks last year rather than continue investigating, Cummings said.
Cummings comments, made in a letter to the committee's chairman, Darrell Issa, R-Calif., were based on documents he obtained from a review ordered three years ago by the Federal Reserve and Office of the Comptroller of the Currency.
Banks agreed to have independent consultants look over their foreclosure files for errors, but that year-long review proved slow and expensive, prompting regulators to shut it down and instead settle with banks in January 2013.
PNC was among 13 mortgage servicers that agreed to a total of $9.3 billion in cash payments and other assistance to borrowers.
Cummings believes the settlement was premature and wants a new hearing on the foreclosure abuses. But PNC, which has admitted no wrongdoing, said that the $69.4 million it paid should have put the issue to rest.
“We believe the settlement was in the best interests of all parties and materially benefited borrowers in a more timely manner than would have been possible under the (independent review),” PNC said in a statement.
The foreclosure settlement isn't the only one PNC paid last year to resolve allegations of bad lending practices.
In December, PNC agreed to pay $35 million to settle charges that National City, which PNC bought in 2008, discriminated against black and Hispanic borrowers by charging them more on home mortgages.
Cummings' letter cited fragments of consultants' reports and his office would not make the original documents available. PNC said his letter gave an “incomplete view” of the situation because the various banks — including Wells Fargo and Bank of America — hired different consultants with their own process and schedule.
Still, the documents suggest that regulators ended the review prematurely, Cummings said.
“I am concerned that even without complete information, federal regulators chose to settle, possibly to the detriment of borrowers harmed during the housing crisis,” Cummings said Friday. “Americans, especially those who lost their homes to these practices, deserve to know why.”
Spokesmen for the Fed and OCC declined to comment.
Continuing to investigate banking practices during the foreclosure crisis could do more harm to borrowers than good, said Tom McCue, associate professor of finance at Duquesne University's Donahue Graduate School of Business. Lenders have been reluctant to loosen credit standards amid a tighter regulatory environment, and bringing attention to past practices won't convince banks to do otherwise.