Readers may remember that one of the outcomes of the robosigning scandal was that mortgage servicers entered into consent decrees with the OCC and other regulators in early 2011.
One component of the OCC program was “independent” foreclosure reviews that would be offered to borrowers to determine if they had been harmed by a foreclosure and provide restitution. The servicers were required to do “outreach” to borrowers who might have suffered to give them the opportunity to request a review. You have to understand that this was never a good faith effort, even though HUD secretary Donovan trumpeted these assessments as an important part of “social justice.” The purpose of every new bank review process implemented since the Obama administration took office has been to go through the motions of being thorough (typically not convincingly, as with the first stress test and the Foreclosure Task Force demonstrate ) and give a clean bill of health. Having the OCC look at a whole passel of foreclosures and say, “See, the overwhelming majority were OK” would be an important step in turning the clock back to before the robosigning scandal broke.
The participation has been underwhelming, given the theoretical upside to borrowers. After extending the deadline twice, the servicers got a 5% response rate. That might seem pretty good by the standards of direct mail, but the benchmark is probably the takeup rate for class action litigation related mailings, which is presumably much higher than the norm. The servicers did two mailings, advertised (web, print, radio), and did outreach in some communities.
The GAO, which was asked to look into this matter, came down on the servicers for their failure to develop jargon-free, readable materials. Their excuse was that they felt pressured by deadlines and couldn’t take the time to test the letters in focus groups. The GAO was not impressed with that, and referred to Federal “plain language” guidelines that stress the importance of avoiding jargon and writing to the level of the audience, which in the US means at the eight grade level or lower. By contrast, the mailings were scored at the second year college reading level (roughly that of this blog).
Now of course, one should never attribute to malice that which can be explained by incompetence. But let’s face it, servicers have every reason to throw a spanner in the works of these reviews, since more successfully completed review forms not only means more work and expense for them, but it also can lead to more payouts and more proof that they were incompetent at best, predatory at worst. And there is ample evidence they’ve been using every trick at their disposal to do so. From a post by Abigail Field:
But here’s a few highlights to show how rigged the process is:
“I have found errors that should be moved up through the ranks, but am told “quit digging so deep”…”put your shovel away”…Focus on the questions “in scope”… The review forms are set up so no harm could ever be found. It’s equivalent of an attorney presenting his case to a judge with just 20% of the evidence.”
“The foreclosed victims don’t realize if they do not provide specific dates on the intake forms… their complaints are considered “general comments” out of scope.
The kicker? The forms don’t tell people their information will be ignored if the complaints are not dated…
Indeed, Wells Fargo’s Promontory process apparently found no wrong doing in 9,996 cases out of 10,000 examined. The other four were sent to Wells Fargo for further review but came back as no problem. At least, 0 problems out of 10,000 files is what the insider’s supervisors announced to everybody. I don’t know if the supervisors were telling the truth or just trying to message everyone to not find any problems in any files. Either way it tells you the same thing: the reviewers won’t find anything wrong with the files.
So while it’s useful to have the GAO expose how the review process is certain to be missing a lot of people who ought to be included, that assumes they’d actually get a fair hearing. Perhaps they are being done a service by not having their hopes raised and then dashed.