“Citizens call for tough regulation of residential mortgage servicers”

We just e-mailed the following message, along with a spreadsheet of signatures and messages, to Timothy Geithner, Ben Bernanke, Mary Shapiro, Sheila Bair, Ed DeMarco, and John Walsh. Thanks for your interest and involvement in curbing bad practices in the mortgage arena.

My name is Yves Smith, and I run the economics-focused blog NakedCapitalism.com. I am also the author of the book Econned, and I recently published a New York Times Op-Ed piece on the foreclosure fraud scandal.

I am writing to submit thousands of names of people asking you to impose regulations on mortgage servicers as part of the risk-retention piece of the Dodd-Frank regulatory reform act. We support the Rosner-Whalen letter on mortgage servicer regulation. Over 12,000 people have signed our petition, which you can see at StopServicerScams.com.

It is quite obvious that the broken securitization market cannot be fixed without clear rules for mortgage servicing. Furthermore, regulatory failure to effectively police mortgage servicing is impairing the value of mortgage backed securities. You have the legal authority to write such rules as part of Dodd-Frank, and my readers and I encourage you to do so.

Here are several comments from signers of this petition.

“I am a former mortgage loan closer with a major bank. I am appalled at the ethical and legal violations that have gone on and continue to go on. I feel that regulation is absolutely necessary not only to protect customers, but in the end to strengthen the banks and the economy as a whole.” – Jennifer Newmark

“Allowing one segment of our society to defraud the other is hardly a recipe for economic recovery.” – Mike Nickel

“As a former banking regulatory attorney, I know how important it is to resist agency capture and the banks’ “we know best” attitude. The financial system WILL NOT CRUMBLE if regulators actually put banks’ customers first.” – David Konigsberg

I have cc’d the other members of the Financial Stability Oversight Council, and Assistant to the President Elizabeth Warren. The human cost of rogue mortgage servicing is obvious, but beyond that cost, it is clear that having a stable and healthy market for credit via securitization will require a restoration of trust and fair play by your actions.

Sincerely yours,

Yves Smith

And 12,000+ signers of the StopServicerScams.com Petition

CC: Secretary of the Treasury Tim Geithner, Department of the Treasury
Chairman Sheila Bair, Federal Deposit Insurance Corporation
Chairman Ben S. Bernanke, Board of Governors of the Federal Reserve System
Chairman Mary Shapiro, Securities and Exchange Commission
Director (Acting) Edward Demarco, Federal Housing Finance Agency
Comptroller of the Currency (Acting), John Walsh, Administrator of National Banks

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  1. Stan

    There is no need to worry any longer. According to HuffPost this am the state AG’s are ready to enter into an agreement with the five largest lender/servicers. All will be well and the states will have finished another fund raiser similar to going to bed with the tobacco companies.

  2. Please Get Real

    Dear Enabling Deletantes:

    Break the servicers up, prosecute and jail. I ask that Timothy Geithner, Ben Bernanke, Ed DeMarco, and John Walsh all resign immediately, and a majority of Americans have in fact asked for their firing. Refusal to acknowledge, address, admit complicity, acknowledge co-conspiratorial activities, enabling regulations, destruction of existing regulations or do anything about the greatest swindle in the history of the country shows a pattern of support and approval for financial terrorism. A terrorism, dear Sirs, that is far more destructive then any imaginary enemy.
    Belligerent Regent

  3. Dave of Maryland

    The solar eclipse was at 4:03 am EST this morning, January 4, 2011. It was at 13 Capricorn, and peaked in northern Sweden. With the moon’s node 11 degrees out, it was nowhere near total. This was why it was ignored by the media.

    I mention this as solar eclipse days are notable, and the events that happen on those days fateful, one way or another. This does not mean this effort to reform mortgage servicing will be successful, but that your petition will be a major milepost.

    Normally I don’t bother you with this sort of thing, but it’s rare to see such an action fall exactly on an eclipse, the most critical time usually defined as 24 hours before or after exactitude. I don’t know if to laugh or cry. Time will tell.

  4. Bob Blake

    No one with the power to do anything cares about those who have no power to do anything. This is the recipe that results in some “peoples’ savior” taking the reins of government with the promise to resolve the problems and at the same time has no intention of resolving any problems but only lining his/her pocket by allowing the problems to continue and deepen. I recently reread The Rise of the Third Reich. History repeats. I fear the final solution will be writ once again. Oh wait, the peoples’ savior was voted in. More saviors are in the wings awaiting 2012. What’s changed?

    Nothing with respect to the banks, the servicers etal.

    Change you can believe in now means you are virtually stripped searched and/or sexually molested in order to get on an airplane. Children are being sexually molested while their parents hold them. If I did what the TSA “I’m just doing my job” employees do I’d be arrested for sexual molestation. But it is to make us “safer” so that’s why as a country we accept sexual molestation as the new normal. The TSA lines are the cattle cars of the present. Avert your eyes and maybe they won’t come for you.

    Change you can believe in now means that the number of people in this country on food stamps, SNAP if your prefer, has doubled in two years. But who cares unless you happen to be one of them.

    Change you can believe in now means that the stock market is booming but the number of people without a job or one that pays the minimum bills is over 20%.

    I grew up in the sixties. I was in Riverside Church when Martin Luther King spoke most eloquently and still resounds today “A time comes when silence is betrayal . . .” It’s a speech worth reading today.

    Where are our church leaders? Silent.

    Where is our “elected” government? Silent.

    I appreciate the concept of a petition. But that only works if the one you give it to has any interest whatsoever in what you have to say and is committed to representing you.

    Their silence is a betrayal. History repeats.

    1. readerOfTeaLeaves

      No one with the power to do anything cares about those who have no power to do anything.

      With all due respect, I’ve spent enough hours of my life in meetings related to local government to have become convinced that there is rarely ever a time when people have ‘no power’. They have power when they educate themselves, and then get organized. Then, they have to figure out where the underbelly of the beast is most tender, thin, and vulnerable.

      Strategy, sir.

      People are only powerful when they give up.
      When they start figuring things out and calling b.s., and providing mountains, and mountains, and mountains of evidence then slowly the wheel starts to turn.

      What appears to be happening is that the AGs are caving to banks — that’s at first blush; I await further analysis. If this is true, then it’s really simply ‘more information’. The AGs will then lose respect over the coming year(s), as will the judicial system if it continues to allow lawlessness.

      What we appear to have before us is the failure of a set of economic assumptions and beliefs; we badly need new economic structures, IMVHO.
      In that respect, I see nothing but opportunity for new enterprises that offer much more transparency, better relationships with customers, and are more economically equitable.

      This may seem strange for anyone to write on a blog, but in my view the present system is so profoundly compromised there is ‘nothing but opportunity’ for creative, equitable enterprises.

      1. readerOfTeaLeaves

        Gack! Too rushed (blushing…!)

        People are only powerful when they give up.

        Should have read: People are only powerLESS when they give up.

      2. financial matters

        Well said, reader.

        There is an interesting article in the MIT Sloan Management Review: ‘The Collective Intelligence Genome’

        Why do people do what they do such as on this blog spending hours studying these issues… One thing they mention is the ‘love gene’

        “””Love. Love is also an important motivator in many situations, even when there is no prospect of monetary gain. The Love gene can take several forms; people can be motivated by their intrinsic enjoyment of an activity, by the opportunities it provides to socialize with others or because it makes them feel they are contributing to a cause larger than themselves. Studies of Wikipedia have shown that its participants are motivated by all three of these variants of the Love gene. “””

      3. MichaelC

        Strategy, sir.

        Excellent point! That should give every self confident cynic pause

        I’d add :

        And perseverence and patience and a healthy respect for the absurdity of politics (which conspiracy theorists and economists never factor in). All kinds of unexpected consequences (both good and bad) will result (as it ever was), or as you point out, opportunities will emerge.

        Those that have the power to do anything are on shakier ground than they fear. Politicians are very fragile creatures. We shouldn’t forget that. All we need do is shout “bullshit” in a crowded room.

        The trick now is to keep trying to fill that room with seriously pissed off people (or as a start serious AGs).

  5. killben


    I am sorry to say that while these efforts are the proper peaceful measures that should be adopted .. do you seriously think it is going to stop these rascals from being bailed out incessantly and supported by measures such as removal of prudent accounting norms, removal of any criminal wrong doing etc.. essentially abetting and making sure these rascals thrive come what may!!

    Unless people revolt… banks will get bailed out by these rascals and citizens will get raped endlessly.

    People have an option .. they can go after the banks directly .. if you see a banker hit him, if you see a bank office stone it .. or go after the abettors .. Ben Bernanke, Geithner, Paulson, FASB Chief, Congressmen…

    If you know you are being raped and you enjoy it then there is just no incentive for the rapist to change … he will keep at it with the aid of pimps ..

    So till people revolt .. e.g. mass strategic default (at least in states where the banks cannot come after you) would be a good start

    Without people raising the banner of revolt NOTHING WILL CHANGE …

    So while the recovery is a trumpeted one, banks are being stealthily bailed out by the Fed and Treasury (ably supervised by FDIC).



  6. MichaelC

    Thank you Yves for using your bully pulpit to good effect.
    Collecting 12000 signatures in a few days (during holiday season, no less) in support of arcane rules should signal to these chuckleheads that at least their better informed constituents are paying attention, understand the con, and are watching and broadcasting their moves. The only way out of this mess is a steady spotlight on each of the rotten bits that led us here.

    Nice way to start the New Year.

    1. readerOfTeaLeaves

      Clearly, given my earlier comment on this thread, I salute your superb timing.

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