Feds Reviewed Only 100 Foreclosure Files in Servicer Whitewash

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Not only are the authorities engaged in a coverup of servicer abuses, they aren’t even bothering to pretend that the effort is serious. A post on Housing Wire offers some choice tidbits:

When mortgage servicers signed consent orders with the Office of the Comptroller of the Currency and the Federal Reserve, these companies were required to hire outside firms to conduct “look back” evaluations of questionable foreclosure practices.

But these reviews will not be made public, according to an OCC spokesman.

So there will be no check of whether this process is any good, either in the independence of the party chosen, the scope and nature of the investigation, and the findings. We saw this coming, as did Adam Levitin:

By far the most interesting bit in the draft C&D order is the bit requiring the banks to engage independent foreclosure review consultants to review “certain” foreclosures that took place in 2009-2010. There is no specification as to which foreclosures are to be reviewed or precisely what the standards for review are. But that’s all kind of irrelevant. Who do you think the banks are going to engage to do these reviews? Someone like me? Not a chance. They’re going to find firms that signal loud and clear that if they get the job, they won’t find anything wrong. It’s just recreating the auditor selection problem, but without even the possibility of liability for a crony audit.

Frankly, this sort of regulatory outsourcing is pretty astounding–the OCC has resident examiner teams at the major servicer banks. Shouldn’t they be the ones auditing the internal controls and performance, not a third-party compensated by the bank? (Oh wait, I forgot that the OCC is paid by the banks–it’s budget comes from chartering fees and assessments on the banks is regulates. Indeed, I was struck in some places by the linguistic similarities between the proposed C&D order and the banks’ counterproposal to the AGs. It’s impossible to know who was cribbing from whom, but the similar language is revealing.)

So here’s what’s going down. The bank regulators are going to provide cover for the banks by pretending to discipline them very hard, but not really doing anything. The public will see a stern C&D order, but there won’t be any action beyond that. It’s as if the regulators are saying so all the neighbors can hear, “Banky, you’ve been a bad boy! Come inside the house right now because I’m going to give you a spanking!” And then once the door to the house closes, the instead of a spanking, there’s a snuggle. But the neighbors are none the wiser. The result will be to make it look like the real cops (the AGs and CFPB) are engaged in an overzealous vendetta if they pursue further action.

We were already very unhappy about the fact that the review was conducted on 2800 mortgage files across 14 servicers and there seemed to be no scientific process for how the cases were selected. The GAO signaled it had reservations about the exercise. And no wonder. Not only was it a garbage-in, garbage out process (whether the borrowers were delinquent was based on the servicers’ say so, not any analysis to see if the fees, charges, and applications of payments were in compliance with the law and the various agreements), it effectively said pretty much all foreclosures were warranted when it looked at only 100 completed foreclosures:

Federal Deposit Insurance Corp. Chairman Sheila Bair said in a Senate committee hearing this week that these reviews will be a major issue. The investigation conducted by the OCC and the Fed included a review of just 100 foreclosure files.

No wonder Bair felt compelled to distance herself from this regulatory theater. It isn’t just pathetic, it’s the regulators thumbing their noses at the public.

And of course, this revelation shows how low the will bar is for those independent investigators. If they’ve walked across the servicer’s lobby, that will no doubt suffice.

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7 comments

  1. attempter

    Just a minute ago I wrote a comment in another thread which mentioned the criminal Obama’s anti-democratic, anti-sovereign secrecy regime. Then I click on this link and immediately see:

    But these reviews will not be made public, according to an OCC spokesman.

    The subject matter of this post is a perfect example of why. Even if one wanted to believe in the legitimacy of representative government in principle, this government has unilaterally abdicated all such legitimacy.

    We see how in its intent (to empower corporate looting and tyranny) and procedures (it’s to do nothing but set up corporatist procedures and hand over taxpayer money; the procedures aren’t intended to do anything but loot this money, and are otherwise a whitewash; regulatory agencies are nothing but front groups and stolen money couriers) this government is both worthless and malevolent.

    (For the sake of the mentally more slow, who still want to believe in differences between the Democrats and Republicans, I can also point to the OCC as one place where Obama made a point of leaving Bush political appointees in place. There in particular he wanted to signal to the banksters the fundamental continuity between the Bush administration and his.

    But this same continuity was universal, even if in some other places he tried to pretend differently for the sake of his gullible “progressive” supporters.)

    1. Mark P.

      ‘For the sake of the mentally more slow, who still want to believe in differences between the Democrats and Republicans….’

      One difference is that every four years some specific segment of the American corporatocracy captures the U.S. presidency and government, and in the case of the Bush administration it was the energy industry. The Bush administration prosecuted Enron, nonetheless, and put Skilling and other executives in prison.

      Conversely, the Obama administration, a creature of the financial industry, has prosecuted and convicted nobody from the finance industry.

      1. Salviati

        I would argue that it extends to practically all segments of American corporatocracy. For instance there has been no change in Washington’s approach to the FIRE sector from Clinton to Bush to Obama. The same is true regarding the Energy and Defense sectors.

        The seeming special treatment is more a function of the sector who is in the public eye. For instance, when the public was getting screwed by the energy sector people were legitimately pissed off to find that they had the full backing of the US government. Now the public is still getting screwed by the energy sector but it pales in comparison to the degree that we are getting screwed by the FIRE sector and we are even more pissed off to find that they also have the full backing of the US government.

        1. Mark P.

          Oh, no argument. It’s a corporatocracy, after all.

          I’m just remarking that, when there was a instance of massive fraud in their favored corporate sector, the Bush administration stepped up and — for all its manifold failings — had the rudimentary cojones to let that instance of massive fraud be prosecuted.

          With the Obama adminstration, nada. Nothing but complicity with what was and is fraud from top to bottom: the biggest white-collar crime in history, as Bill Black says.

          That, indeed, would seem to be the implicit practical justification of the Obama administration for their not going after the financial industry — “they were all doing it, so how can we send any of them to jail?”

  2. Hugh

    I would say this is a characteristic of late stage kleptocracy where efforts to hide the looting have largely fallen by the wayside and the justifications for it have become flimsy and pro forma.

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