The news that a single loan officer working for Ally’s GMAC mortgage unit processed tens of thousands of foreclosure documents, many apparently falsified, each month for five years should have executives and auditors at all the large mortgage servicers quaking.
This looks like a dramatic failure of legal mandates under Sarbanes-Oxley that companies have strong internal controls.
The decisions by Bank of America and JP Morgan Chase
to halt foreclosures also seem to point to possibly inadequate internal controls.
Under Sarbanes-Oxley, companies are required to have policies that provide reasonable assurance regarding their financial reporting, including maintenance of records reflecting the transactions and dispositions of their assets. The failure to effectively monitor the foreclosure process seems a pretty good candidate for violating the internal controls requirements.
We suspect fear of getting tagged with material weaknesses in internal controls is one of the reasons banks are jumping on the foreclosure moratorium bandwagon with such speed.