State regulators suspected that there was something fishy about banks' foreclosure procedures as far back as three years ago, but federal regulators forbid them to take action, the Washington Post reports. The federal comptroller told the states his office was already planning an investigation, and that banks should only respond to federal inquiries. But instead of following through, the office trusted the banks’ self-assessments.
“Based on what we were seeing and what we were concerned about, it felt like a chronic underreaction at the federal level,” said a state banking official. When the mortgage industry identified problems with thousands of foreclosures in September, the Office of the Comptroller of the Currency still refrained from investigating. Only two weeks ago did the OCC—the top overseer of the biggest banks—take action by sending its own workers into banks to review foreclosure practices.