Three federal agencies have ordered 16 lenders to reimburse victims...

Three federal agencies have ordered 16 lenders to reimburse victims of improper foreclosures. The lenders must hire auditors to find these individuals. But critics are saying the orders are not strong enough. Credit: File, 2008 / Joseph D. Sullivan

WASHINGTON -- The U.S. government ordered 16 of America's largest mortgage lenders and servicers Wednesday to reimburse homeowners who were improperly foreclosed upon.

Government regulators also directed the financial firms to hire auditors to determine how many homeowners could have avoided foreclosure in 2009 and 2010.

Citibank, Bank of America, JPMorgan Chase and Wells Fargo, the nation's four largest banks, were among the financial firms cited in the joint report by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency. The Fed said it believed financial penalties were "appropriate" and that it planned to levy fines. All three regulators said they would review the foreclosure audits.

In the four years since the housing bust, about 5 million homes have been foreclosed upon. About 2.4 million primary mortgages were in foreclosure at the end of last year. Another 2 million were 90 days or more past due, putting them at serious risk of foreclosure.

Critics, including Democratic lawmakers in Congress, say the order is too lenient on the lenders. House Democrats introduced legislation yesterday that would require lenders to perform a series of steps, including an appeals process, before starting foreclosures.

"I want to know what abuses [the government agencies] identified, which banks committed them and how their proposed consent agreement is going to fix these problems," said Rep. Elijah Cummings, the ranking Democrat on the House Government and Oversight Committee. "Based on what I have read . . . I am not encouraged at all."

The other lenders and service providers cited by the agencies are: Ally Financial Inc.,  Aurora Bank, EverBank, HSBC, MetLife Bank, OneWest Bank, PNC, Sovereign Bank, SunTrust Banks, U.S. Bank, Lender Processing Services and MERSCORP.

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