Obama's Pocket Veto

President Obama has refused to sign a bill that some say would have made it tougher for consumers to fight suspect foreclosures at the heart of an investigation that has spread to 23 states.

The bill, which slipped through Congress with little public notice, would have benefited banks. House bill 3808, the Interstate Recognitions of Notarization Act, would have required judges to accept out-of-state notarizations. The banks and the bills supporters in Congress said the measure would have facilitated interstate trade. Senate Patrick Leahy, Democrat of Vermont, led the bill through the Senate on September 27 without debate.

"President Obama will not sign H.R. 3808. While we share this goal, we believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized," the White House said today in a statement.

Why the pocket veto? The Justice Department is looking into reports that loan services are improperly processing thousands of foreclosures a month. The issue is whether banks and loan services have used "robo-signers," mid-level lending officers, to process thousands of foreclosures a month, swearing that they were familiar with all of the cases.

Amid a furor over possible improper documentation, Bank of America and JPMorgan Chase are halting some foreclosures in 23 states. Ally Financial, once known as GMAC, is halting foreclosures in 23 states. Wells Fargo reached an agreement with eight states that were investigating the issue of deceptive loan marketing and promised to modify $722 million in mortgages.

The furor has grown amid a rising number of foreclosures, which have turned into big business for some lenders, loan-payment collection companies, and process servers who deliver foreclosure documents. RealtyTrac says lenders will take back 1.2 million homes this year, up from 1 million last year. That is far above the norm. There were only 100,000 foreclosures in 2005, just before the first signs of the subprime meltdown became apparent.

"We need to think through the intended and unintended consequences of this bill on consumer protections, especially in light of the recent developments with mortgage processors," the White House said.

"When Congress passed the legislation, no concerns or objections had been expressed. Now that concerns have been raised, Congress should reexamine whether this bill might have an unintended impact on foreclosures in the future," Leahy's office said in a statement.

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