We have yet another example of media cravenness. You would assume that when official positions presented in the media contradict each other, it would represent an obvious opportunity for reporting, and an intrepid young journalist would take up the task. But since the job of US news outlets is increasingly to distribute propaganda, they manage not to notice.
We’ve had a stenography masquerading as reporting on the results of the recent Foreclosure Task Force “review” of servicer practices. After looking at 2800 severely delinquent loans, it found only some operational shortcomings and no unjustified foreclosures. Given that all that this cross agency effort did was to have tea and cookies with the servicers while reviewing their documents, as opposed to doing any validation of their data, this means the “exam” was a garbage in, garbage out exercise.
Similarly, today the Fed made the similarly ludicrous statement that there were “no wrongful foreclosures” based on a review of a mere 500 loan files. Given that there are 14 major servicers, that means it looked at 36 files on average per servicer. Heck of a job, Brownie!
Aside from the fact that there have been numerous reports of colossal errors that should be impossible in a system with any integrity (homes with no mortgages or where the mortgage had been paid off, where borrowers had been given letters that they had been approved for permanent HAMP mods being foreclosed upon), there are also numerous accounts of servicer-driven foreclosures. As Karl Denninger noted:
We have myriad reports of homeowners who are told to intentionally default by servicers, a clear act of bad faith. We have documented instances of banks breaking into homes that are occupied, an apparent serious state felony. We have documented instances of banks playing games with forced-placed insurance, escrow accounts and similar acts leading to foreclosure.
But the most telling contradiction of the banking regulators’ “nothing to see here” stance is the Administration’s aggressive pursuit of servicing abuses against active duty soldiers. When a Congressional hearing focused on how JP Morgan illegally foreclosed on soldiers, the bank went into overdrive to do damage control. As David Dayen reported:
The big bank went out of their way to fix the problem yesterday, knowing that abusing service members could get you in big trouble in this country, and lead to further scrutiny of their abusive practices. Calling these violations a “painful aberration” on a track record of honoring military families, JPM CEO Jamie Dimon announced:
• New pricing. Under the Servicemembers Civil Relief Act, servicers are required to cap mortgage interest rates for active duty personnel at 6%. JPM will lower that cap to 4%.
• Military modification program. JPM will go beyond HAMP requirements for all personnel who served on active duty going back to 9/11. If the borrower has a second lien with them, they will reduce the interest rate on it to 1%.
• No foreclosures. JPM will not foreclose on any active duty military personnel overseas. Anyone who was wrongly foreclosed upon previously will not only get their home back, but JPM will forgive all remaining home debt. They promise to do that in the future with any other wrongful foreclosure of a military family.
• Donations. JPM will donate 1,000 homes to military and veterans, through a non-profit partner, over the next five years.
• Jobs. They will commit to hiring 100,000 military and veterans over the next ten years. They will also offer a Technology Education certificate for veterans to take free to get technology training for future careers.
• Advisory Council. They’ll form an Advisory Council to determine other ways to help military families. They’re also opening a bunch of Homeownership Centers near military bases to assist families.
Needless to say, this is a PR gambit to the nth degree. But look how incredibly scared JPM is that anyone will look past the abuse of military families. They are going out of their way to burnish and repair their public image on this one, and the goal is to whitewash the fact that they were merely engaging in standard servicer practices of abusing homeowners and illegally foreclosing.
To underscore Dayen’s point, servicers are factories with highly routinized, bad procedures. If you see one abuse reported more than a time or two in the media, like force placed insurance or fee pyramiding, it is not a mistake. It’s policy.
Not surprisingly, JP Morgan appears to have company in the “grinding up servicemen for fun and profit” school of banking. And while the Administration has bent over backwards to protect servicers by disputing any suggestion that they’ve made unwarranted foreclosures, they’ve been fast to saddle up the Department of Justice to investigate over the very same issue,20 probably impermissible foreclosures at Saxon, a servicer owned by Morgan Stanley, because it involved active duty personnel. From the New York Times:
The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.
A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing.
Mark Lake, a Morgan Stanley spokesman, declined on Friday to comment on the investigation. However, in the fine print of a recent regulatory filing, Morgan Stanley disclosed that it was “responding to subpoenas and requests for information” from various government and regulatory agencies concerning, among other issues, its “compliance with the Servicemembers Civil Relief Act,” the law that governs the actions creditors can take against service members on active duty.
This two-tier approach is intriguing: aggressive pursuit of abuses when members of the armed forces are the victims, flat-out denials for the rest of us. Dave Dayen thinks it’s politics, but I wonder if something deeper is at work. The Pentagon has been aggressive in blocking other forms of exploitation of soldiers, such as locating payday lenders near military bases (the Pentagon sought and won interest rate ceiling. My 2007 post on that tussle was “The Pentagon as Financial Regulator.” Maybe that’s an idea we need to entertain more seriously. It seems to be the only body with the authority and firepower to take on the mortgage industrial complex.