SEC Seeks to Shed Light on Foreclosure Crisis

The U.S. Securities & Exchange Commission (“SEC”) has entered the foreclosure fray by requiring publicly traded financial services companies to disclose their estimated risk of foreclosure related losses. Here’s what Bloomberg Business Week reported on the recent SEC actions.

Lenders must disclose circumstances that they “reasonably expect” to have an “unfavorable impact” on financial results, the SEC said in a letter posted on the agency’s website today. The letter was sent because of “concerns about potential risks and costs associated with mortgage and foreclosure-related activities,” the SEC said. Federal regulators and attorneys general from all 50 states are investigating whether loan-servicing companies used improper procedures during foreclosure proceedings, including so-called robo-signers who didn’t check documentation. Investors such as Pacific Investment Management Co. have demanded that banks buy back faulty loans that were bundled into bonds.

These forced disclosures will shed more light on the potential dollar impact of an operational risk that was neither fully anticipated nor proactively managed.

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About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at www.WheelhouseAdvisors.com.

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