At least some legislators are taking the foreclosure crisis seriously. Representative John Conyers, Marcy Kaptur, Raúl Grijalva, and Alan Grayson wrote to Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program, to ask that he investigate foreclosure fraud and conduct an audit of GMAC, Fannie, and Freddie. SIGTARP is a full fledged prosecutor, and Barofsky has an established history of being a serious investigator.
In a parallel action, six senators (Sherrod Brown, Tom Harkin, Barbara Boxer, Debbie Stabenow, Sheldon Whitehouse and Mark Begich wrote Timothy Geithner and Ben Bernanke, demanding that they crack down on foreclosure abuses “in the best interest of homeowners and investors.”
In general (quelle surprise), the Congressional response is breaking along party lines, with Democrats at the liberal end of the spectrum taking interest, Republicans working with banks to try to make this go away quickly and the Obama Adminstration trying to befriend the banks as much as possible without riling progressives too much. From Politco:
How long will President Barack Obama and Congress be able to avoid wading into the foreclosure mess? …
Still, administration officials are wary of a backlash from liberal Democrats and progressive groups unhappy that the government hasn’t been more successful convincing banks to renegotiate mortgages for homeowners who can’t keep up with their payments. House Speaker Nancy Pelosi has asked the Justice Department and bank regulators to open investigations of foreclosure abuses but has not called for a nationwide moratorium.
Republican leaders have said little about the foreclosure problems, except for House GOP Whip Eric Cantor, who warned that a moratorium threatened to destabilize the housing recovery.
Behind the scenes, Republicans are consulting with the banks, which are hoping to reach a quick settlement with attorneys general from all 50 states who have announced a joint investigation into home foreclosures. The settlement would involve a sizable fine and some basic reforms to the foreclosure process.
By contrast, the official minders of banks seem to be doing their very best to look the other way.The Office of the Comptroller of the Currency is repeating bank talking points. From the Huffington Post:
The nation’s top bank regulator doesn’t believe homeowners are being harmed directly by an ongoing foreclosure fraud scandal, despite multiple reports of banks mistakenly evicting homeowners who aren’t even in foreclosure….
The Office of the Comptroller of the Currency does not view anecdotes like Jacobini’s as evidence of consumers being harmed by the unfolding foreclosure fraud scandal.
Yves here. This posture is curious on two levels. First, the remarks focus strictly on the robo signing issue, which as we have indicated, while a serious abuse of court processes, is a mere symptom of much deeper problems, most importantly, the failure to convey the promissory note to the securitization trust. But even on a more superficial level, the OCC is clearly adopting a “don’t ask, don’t tell” posture. Again from the Huffington Post:
Part of the purpose of having a human being actually look at a file and verify that a particular mortgage should be foreclosed is to prevent that kind of thing from happening,” said Alan White, a professor at the Valparaiso University Law School. “OCC assumes incorrectly that foreclosures are initiated (and the robosigning starts) ONLY after all efforts at modifications and short sales are exhausted. This is clearly incorrect. Servicers routinely file foreclosure (with robosigned affidavits) at the same time that their loss mitigation departments consider requests for modification and short sales.”
Yves again. We are also told there was a meeting yesterday among the OCC, the SEC, and others, in which the participants ‘fessed up that they were only coming to grips now some of the more serious legal questions. So how can the OCC then claim that there is not nothing to see here when it hasn’t even done its homework?
Similarly, a reader told us that the FDIC is also taking a bank friendly view. From an e-mail message:
I inadvertently got into a tussle with a senior Bair staff member.
It seems she is absolutely, positively convinced that the current foreclosure mess is just a paperwork issue. She claims that while allowances for litigation will have to increase, there really is nothing major to worry about. Her certainty made me more afraid, not less.
This is a variant of the strategy we saw employed in 2007 and much of 2008: a combination of lack of investigation, denial, and confidence building talk. Two beliefs seemed to be operative: first, that the financial system problems weren’t that bad, and second, siding with the bank was going to work out best for everyone. We know how valid those assumptions proved to be.