Released: April 23, 2007

Lenders criticized for role in foreclosures

Source: Alan Zibel, Associated Press [Dallas Morning News]

Consumer advocates have begun criticizing major mortgage lenders, such as Countrywide Financial Corp. and GMAC Financial, that also have in-house foreclosure businesses.

It is “mind-boggling” that in many states, people can lose their homes in foreclosure without any court hearing and that the foreclosure is done by a company with ties to the lender, says Ira Rheingold, general counsel for the National Association of Consumer Advocates in Washington. “They should be completely objective and not have any financial interest in how the case is resolved,” Rheingold added.

Bert Ely, a banking industry consultant in Alexandria, Va., disagreed, pointing out that lenders have every incentive to prevent foreclosures. “No legitimate lender wants to foreclose, and the reason why is that the losses are very substantial,” he said.

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