NYC Pension Funds Call on Banks to Review Foreclosure Practices

January 10, 2011 ( - A coalition of seven major public pension systems called on the boards of directors of Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo to immediately undertake independent examinations of the banks’ mortgage and foreclosure practices.

Led by New York City Comptroller John C. Liu on behalf of the five NYC Pension Funds, the coalition also includes the Connecticut Retirement Plans and Trust Funds, the Illinois State Board of Investment, the Illinois State Universities Retirement System, the New York State Common Retirement Fund, the North Carolina Retirement Systems, and the Oregon Public Employees Retirement Fund, according to a Liu news release.   

The pension funds called for the banks’ Audit Committees to launch independent examinations of their loan modification, foreclosure, and securitization policies and procedures.  

The news release said Federal Reserve Governor Daniel K. Tarullo testified to the Senate Banking Committee on December 1 that the Federal Reserve’s preliminary findings on bank foreclosure procedures suggested “significant weaknesses in risk-management, quality control, audit and compliance practices as underlying factors contributing to the problems associated with mortgage servicing and foreclosure documentation.”   

Liu commented: “The banks’ boards cannot continue to pretend the foreclosure mess is the result of technical glitches and paperwork errors. There is a fundamental problem in their procedures that endangers not just homeowners, but shareholders, and local economies.  Given the risks involved, only a swift and unbiased audit can reassure shareholders that the pension funds of 700,000 working and retired New Yorkers are in safe hands.  The boards of directors have no time to waste.”   

The news release said the coalition represents more than $430 billion in pension fund investments, including $5.7 billion invested in the four banks.  

According to a Bloomberg news report, Citigroup has received the letter and will review it with members of its audit committee and respond, said Shannon Bell, a spokeswoman for the New York-based bank.   

Wells Fargo spokeswoman Mary Eshet said the bank had received the letter and is reviewing it. Joseph Evangelisti, a spokesman for JPMorgan, declined to comment.   

Bank of America hired external auditors to review foreclosure processes last year and improved its procedures before resuming seizures, said Rick Simon, a spokesman for the Charlotte, North Carolina-based lender, in an e-mail to Bloomberg.