In a report released Tuesday, the Congressional Oversight Panel reviewed claims of “robo-signed” foreclosures and other mortgage irregularities, claims that have hit Florida especially hard.

The 127-page report (.pdf) examines allegations that companies “servicing $6.4 trillion in American mortgages may in some cases have bypassed legally required steps to foreclose on a home.” Though the report says that the implications of such mortgage irregularities are not yet clear, concerns over “robo-signing” have both best- and worst-case scenarios.

From the report:

In the best-case scenario, concerns about mortgage documentation irregularities may prove overblown. In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-related affidavits, but the facts underlying the affidavits are demonstrably accurate. Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork.

The worst-case scenario is considerably grimmer. In this view, which has been articulated by academics and homeowner advocates, the “robo-signing” of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure. In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

Northeast Florida has come under scrutiny recently for its handling of foreclosures. CNN aired a segment Tuesday titled “Florida’s foreclosures robo-judges,” in which the use of retired judges to deal with an enormous backlog of foreclosures was examined. Florida, which has the second-highest foreclosure rate in the country, is often accused of using a “rocket-docket” system, in which cases are rushed through quickly, and the banks often win.

The Oversight Panel’s report reveals that, though much has been done to resolve the credit and housing crises, there is little security in the current system:

The American financial system is in a precarious place. Treasury’s authority to support the financial system through the Troubled Asset Relief Program has expired, and the resolution authority created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 remains untested. The 2009 stress tests that evaluated the health of the financial system looked only to the end of 2010, providing little assurance that banks could withstand sharp losses in the years to come. The housing market and the broader economy remain troubled and thus vulnerable to future shocks. In short, even as the government’s response to the financial crisis is drawing to a close, severe threats remain that have the potential to damage financial stability.

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