Banks could stem from investigations into their foreclosure processes.

A congressional watchdog group said Tuesday that U.S. banks should undergo stress testing to determine whether they have enough money to absorb losses arising from investigations into their foreclosure proceedings.

The Congressional Oversight Group, created by Congress in 2008 to review the Treasury Department's response to the financial crisis, issued a 125-page report detailing the recent accusations that banks and loan documents filed thousands of inaccurate foreclosure cases across the country.

While the report acknowledges that the scope and consequences of the dispute remains unclear, the panel warned that the financial system could be at risk if the allegations of "theft" signature "have proven to be true.

"If documentation issues become dominant and, more importantly, throw into doubt the ownership of the assets seized, but not only mortgages also grouped, the consequences could be severe," the report said.

The concern is that banks will be forced to buy back mortgages that were packaged and sold for $ 7,600,000,000,000 in Residential Mortgage Backed Securities or RMBS. That could result in severe losses for banks and destabilize the financial system remains fragile, the report said.

Bank of America has been criticized by some large institutional investors including Pacific Investment Management Company and the Federal Reserve Bank of New York, who have accused the bank of mismanagement of 47 billion U.S. dollars in loans for housing.

In addition, the attorneys general of 50 states have launched investigations into the practices of bank foreclosure.

However, the report said that concerns about theft of firm may be exaggerated, and the panel's chairman, told reporters Monday that he does not know the impact of the problem.

"It could become anything, or could become a big problem," said Senator Ted Kaufman, D-Del. "We're not at the stage we were still all the information you need to determine how severe it will be," he said.

To assess the vulnerability of banks, the group asked regulators to banks under stress tests to measure whether its financial health is strong enough to withstand the losses that may result from the controversy in the worst case.

The Federal Reserve and the Treasury Department to stress testing of banks in 2009 amid the financial crisis. However, these tests provided "limited assurances that the big banks would survive the crisis in the months and years ahead," the report said.
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The panel also agreed with the Treasury Department's statements suggesting that the problem of theft of firm not currently threaten the financial system, saying that such claims "premature."

In response, a Treasury official said in a statement that the agency is working closely with 11 other federal regulators to investigate, but "found no evidence to date of a systemic threat to the financial system in general."

"We firmly believe that the behavior reported in the mortgage services industry is simply unacceptable, and administrators who have failed to comply with the law are held accountable," said Treasury spokesman Mark Paustenbach.