Last month, the U.S. Comptroller of the Currency John Walsh testified before the Senate Banking Committee that only a "small number" of wrongful foreclosure sales have occurred in the United States, despite massive numbers of falsely documented foreclosure actions.

Now a new analysis from Reuters casts serious doubt on Walsh's downplaying of the number of wrongful foreclosures. The sample used by the OCC was very small, and included foreclosures "in-process." If a foreclosure is in process, no sale has taken place, so including them in the data automatically skewed the sale numbers down.

The OCC is planning to impose sanctions on the major mortgage lending banks that would be less heavy than those being negotiated with the state attorneys general. Putting out numbers that imply lower instances of fraudulent foreclosures would probably help justify less harsh penalties.

The state attorneys general, and federal agencies other than the OCC, have called for large penalties and restitution to homeowners and new rules that would encourage, rather than discourage, loan modifications.

Reuters discovered that the OCC's conclusion that there have been only a small number of wrongful foreclosures was based on a sample of only 2,800 foreclosure files. In 2010 there were just over one million foreclosures nationwide.

A footnote in Walsh's prepared testimony for his Feb. 17 appearance before the Senate Banking Committee states that the sample included "in-process" foreclosures as well as completed ones. In this way, the proportion of wrongful sales was driven down.

Fort Lauderdale "stop foreclosure" lawyers have seen that Walsh's statement that only a small number of wrongful foreclosures had occurred has been quoted widely by opponents of harsh sanctions on the bank.

Many foreclosure victim advocates say that banks misstate the amounts owed on a regular basis, the lenders fail to record or properly allocate mortgage payments, and they tack on more and more outrageous fees.

Source: Westlaw News & Insight "Doubts raised on OCC foreclosure estimate" 3/25/2011