We’ve said repeatedly that findings of the multi-agency Foreclosure Task Force review late last fall, which looked at 2,800 mortgages from 14 servicers, was a worse than stress test type review, with a deliberately narrow focus designed to find very little wrong.
One of its remarkable findings was that that banks were on solid grounds in foreclosing, both in the borrower owing the money (which would inevitably be the finding given the failure to investigate servicer-driven foreclosures) and that banks were able to find the borrowers’ notes, which was taken to be tantamount to them having the legal authority to foreclose. Anyone who has been following this issue here or on specialist legal blogs knows that mere possession of the note is often a not sufficient threshold for successful action if the foreclosure is challenged.
In a gratifying show of candor and independence (or perhaps because she recognizes that the facts on the grounds make the Administration/banking industry party line untenable) Bair took exception to the “nothing to see here” stance of the officialdom and took exception to the findings of the Foreclosure Task Force in Congressional testimony earlier today.
From the Wall Street Journal:
The head of the Federal Deposit Insurance Corp. is warning that flaws may have “infected millions of foreclosures” and questioned whether other regulators’ inquiries into problems at the nation’s mortgage-servicing companies have been thorough enough.
“We do not yet really know the full extent of the problem,” FDIC Chairman Sheila Bair said Thursday in written remarks submitted to a hearing of the Senate Banking Committee. “Flawed mortgage-banking processes have potentially infected millions of foreclosures, and the damages to be assessed against these operations could be significant and take years to materialize.”
The Journal contrasts Bair’s commentary with the testimony of acting Comtroller of the Currency
John Walsh last month. Note that we’ve taken a dim view of his stance:
Acting Comptroller of the Currency John Walsh said last month that the problems were limited in scope. They include cases that shouldn’t have gone forward under a law blocking foreclosures on military personnel, ones in which the borrower was in bankruptcy and cases in which borrowers were already on the verge of having their loans modified.
Under consent orders that 14 banks and thrifts reached with regulators in March, financial institutions are required to hire a consultant to review their foreclosures over the past two years to identify any borrowers who were harmed by foreclosure-processing problems.
Ms. Bair, however, questioned whether those reviews will truly be independent. Such consultants “may have other business with [banks] or future business they would like to do with them,” Ms. Bair said. “This is a huge issue.”
Even though the FDIC has not always been as tough as we’d like, it remains the only Federal banking regulator that is unafraid of doing its job. Will this continue after Bair finishes her term this June, or will the Administration install someone more bank friendly? Given the Obama track record on this front, I’m not optimistic.