Mortgage deal: Banks impeded probe, HUD says

Top U.S. banks impeded a federal inquiry into their foreclosure processes, according to a report released Tuesday, dragging their feet on turning over documents and blocking investigators' attempts to interview bank employees.

The inquiry led to the wide-ranging $25 billion mortgage settlement with the five largest mortgage servicers that was announced last month and filed in federal court on Monday.

But the banks hampered an early investigation into whether they were pursuing unlawful foreclosures through shoddy paperwork and lax controls, the inspector general's office at the U.S. Department of Housing and Urban Development said in its report.

Bank of America, for example, provided only excerpts of files, incomplete documents, and conflicting information to government investigators, and refused to provide some of its foreclosure policies.

It also limited employee interviews, and refused to let employees answer certain questions, the report said.

In the Bank of America investigation, the HUD watchdog said it had to enlist the Justice Department's help to issue civil subpoenas in order to secure documents and obtain testimony.

Bank of America spokesman Dan Frahm disputed HUD's report.

"Bank of America fully cooperated with the HUD Office of the Inspector General's review of mortgage servicing practices and any suggestion otherwise is both inaccurate and inconsistent with how we work with all regulators," Frahm said in a statement.

The investigation into the banks was sparked by reports in 2010 that they had used "robosigners" to unlawfully sign foreclosure documents without reviewing their accuracy.

After nearly one and one-half years of negotiations, the five banks - Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial - agreed to pay around $5 billion cash and provide around $20 billion in relief to distressed homeowners in order to resolve the allegations.

But in conducting the investigation, the HUD watchdog had problems similar to homeowners who have complained that the banks have been hard to reach, uncooperative and disorganized during loan modifications and attempts to avoid foreclosure.

JPMorgan Chase, for example, did not provide certain records, other records were incomplete, and it did not provide a point-of-contact to explain or clarify the data, the report said.

A spokesman for JPMorgan declined to comment on the report.

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