I was prepared to give the benefit of the doubt to incoming Comptroller of the Currency Thomas Curry. He did get rid of longstanding bank crony, the OCC chief counsel Julie Williams, and in an unceremonious manner meant to send a message to the rest of the organization. He’s supposedly trying to change the culture, which is a tall order.
But it was on Curry’s watch that foreclosure reviews intended to provide abused homeowners with compensation were shut down abruptly. On the one hand, this was never meant to be a serious exercise, but it turned into such a consultant feeding frenzy, with their fees for a bit over a year’s work coming in at $2 billion across 14 servicers, that they were becoming a costly embarrassment. And the GAO was also breathing down the OCC’s neck, first pushing for far more aggressive efforts to reach borrowers who were entitled to reviews, and then working on a report that was expected to find fault with the OCCs’ process. Matters got much worse in fall 2012. The media was picking up on the fact that the reviews were not even remotely independent. And we also learned from the consultant side that it was becoming far too obvious to too many people that the banks could not substantiate third party charges, particularly attorneys’ fees. It looked like large-scale bilking had taken place (not that that is any surprise after all the other misdeeds perpetrated by servicers).
So with this recap, get a load of the latest effort at damage control by the OCC, via the Financial Times:
Leading US banks accused of breaking government rules when seizing the homes of delinquent customers may have harmed as few as 4.2 per cent of borrowers, according to people familiar with the matter.
The disclosure of the percentage of borrowers who allegedly suffered financial harm due to foreclosure irregularities follows agreements in principle last month between US bank regulators and 13 financial groups involving $9.3bn to settle accusations that the groups engaged in illegal behaviour such as so-called “robosigning”…
The apparently meagre error rate – revealed by the OCC to Congress – may quieten some critics who have argued that the settlement was too small given widespread poor practices in the industry. However, it is also likely to fuel calls for increased public disclosure of documents held by the OCC, which congressional investigators claim may contain details that call the settlement into question.
To its credit, the journalist, Shahien Nasiripour, does provide a bit of understated skepticism:
The error rate is based on reviews of nearly 101,000 foreclosures. More than 500,000 borrowers requested a review. It was unclear how the OCC arrived at the 4.2 per cent figure.
This was a garbage-in, garbage out process. It’s not even clear what these reviews consisted of. For instance, at Wells Fargo, a whistleblower described how virtually all review requests were rejected. But for this purpose, it would no doubt be counted as a legitimate “no harm” finding. Here’s a few highlights from a post by Martin Andelman 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.
Mandelman reports that the insider
“also says that the questions on Promontory’s form are worded in such a way that it makes it very difficult to ever find fault. For example, by using compound questions, he is often told to answer “no,” when the first part of the question would be a “yes.””
Readers will recall we found the same sort of behavior (and a lot more!) in our multi-part series on the Bank of America foreclosure reviews: certain categories of harm excluded completely, pitched battles over review periods (which would lead to certain incidents being excluded), pushback from both internal reviewers and the supposedly independent review Promontory, including nonsensical excuses (like saying a foreclosure that resulted from the bank sending back checks sent on time pursuant to a modification agreement was no harm because the borrower hadn’t made any payments. Hun?) And that’s before you get to the evidence of major gaps in Bank of America records and probable document forgeries and fabrications.
Regulators need to pay a price for this sort of disgraceful performance. I hope Congress does not relent, because if it manages to turn over any rocks, what wriggles out will not be pretty.