Making foreclosures even more difficult

Politicians undoubtedly think that they are going to be popular by forestalling some mortgage foreclosures. The problem is that they are making new mortgages more costly, raising future interest rates, and reducing the number of mortgages that will be made.

The Justice Department and other federal agencies have intensified their review of the banking industry's foreclosure documentation problems, using their powers over bankruptcy proceedings to scrutinize the treatment of troubled mortgages.

A key part of the effort is the Justice Department Trustee Program, the federal watchdog overseeing bankruptcies, which has launched a broad review of Chapter 13 bankruptcy filings by homeowners trying to halt foreclosure proceedings.

A U.S. official said Wednesday that 17 federal Trustee offices around the nation have recently stepped up efforts to scrub Chapter 13 filing documents, looking for documentation errors or improper practices such as inflated fees. Under Chapter 13 bankruptcy, a borrower seeks to halt foreclosure and comes up with a plan to catch up with their mortgage debt within five years.

Leading the federal response is Associate Attorney General Thomas Perrelli, the Justice Department's No. 3 official, who has been tapped to coordinate the efforts of multiple federal agencies, including the Treasury Department and the Securities and Exchange Commission, and also share information with state attorneys general.

The increased federal scrutiny puts more pressure on the banking industry, which is already dealing with probes by 50 state attorneys general into allegations of the improper use of "robo-signers" to foreclose on homes. The industry is also bracing for the results of a separate probe by the Federal Housing Administration, which is scrutinizing the way banks process mortgage payments. . . .