Georgetown law professor and securitization expert Adam Levitin has come upon a real doozy in terms of how banking regulators aren’t even bothering to mount a serious pretense that their much-touted efforts to rein in mortgage abuses are anything more than a coverup for the banks. And he is suitable irate.
If you’ve been following this sorry saga, you may recall that in April of this year, major servicers entered into servicing consent orders with the OCC and Fed. They were clearly all for show. Rather than observer the normal procedure, and have a regulator conduct the exams, the consent orders instead provide for the banks to hire soi-disant independent parties to conduct the reviews. As we and more recently Francine McKenna pointed out, there is pretty much no one with a brand name that is worth renting that doesn’t either have a relationship with the big banks or is keen to develop one. Since the reviews won’t be made public, there is every reason to expect that any problems reported will be strictly cosmetic.
As low as our expectations were, the banks have managed to undershoot them on the downside. Levitin reports on an ad via a temp agency (!) for the sort of foot soldiers who will be performing the audits. Note that this means, contra McKenna, that the actual work won’t be done by experienced professional staff of major firms. Remember, the job is to determine whether “a there was financial harm to the borrower.” As Levitin points out, this involves making multiple legal determinations, such as whether the foreclosure was executed in compliance with relevant state and Federal laws (he’s not making that up, you can see it in the job description). So do they want to hire a lawyer? Nah, you only need a year of “mortgage serviceing/foreclosure experience”. An applicant could be a former robosigner or a servicer call center employee. And that’s consistent with the pay, which is a mere $23 an hour. Home cleaners make more than that in the NY metro area.
Do you have what it takes to be a Mortgage Foreclosure File Reviewer Level 2?…I have seldom seen a document that says more about the
bullshitmalarkey that the OCC and Fed are trying to pass off to cover for the banks than this job ad. I think it demolishes even the thin fiction that the OCC/Fed servicing consent orders are anything more than Potemkin villages. Instead, what we have here is nothing less than a federally-blessed Robosigning 2.0…Bottom line here–it’s hard to take the OCC/Fed consent orders seriously when all they mean is that a marginally more skilled employee is reviewing the robosigners’ original work. And one can easily imagine an LPS red light/green light world in which they are incentivized to review more files faster and less carefully
And he stresses that although the latest revelation is particularly galling, the entire process is fatally flawed:
Even if the banks were paying for top grade legal talent (and it’s a buyers market for legal services now), they can’t determine that there was no financial harm done to the borrower–they simply lack the information to do so.
First, it’s not clear that the banks have maintained files on their foreclosures dating back to 2009, when the consent orders run. Without the original files, there’s really no good way to figure out if the homeowner was harmed financially. I’m not ready to assume that there’s great record keeping on past foreclosures.
Second, even if a lawyer looked at the bank’s file, that’s insufficient for determining if there has been harm. One would need to know something about the borrower’s potential defenses before making such a determination.
It’s worth reading Levitin’s post in full, since he explains at greater length why these are not trivial issues to unravel and require a much more extensive investigation than will be done.
Even though banking overseers increasingly engage in regulatory theater, it’s too easy to see how little the man behind the curtain is really doing. But they and the banks can be so brazen because they assume these matters are sufficiently arcane that only a relatively small number of people, those who have some expertise in the area and aren’t part of the con, will figure out what is going on.
The flaw in the logic is that it is obvious to hundreds of thousands, if not millions, of borrowers that they have been hurt by servicer errors and fraud. And the media has reported on so many inexcusable errors that the victims now know that their experience is far from isolated.
This parasite of bad servicing will only kill the host. Quite a few people on my blog have said they will never own a home (again) or would buy only in cash. The housing market and the balance sheets of millions of American families have and will continue to suffer the consequence of uncorrected abuses by servicers who simply refuse to clean up their act. Not only is this looting, it’s hugely inefficient looting, since servicing isn’t a terribly profitable business even in the best of times. But no one in the officialdom seems willing to stand up to the banks’ imperial right to profit.
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Imperial right to profit. It has a certain ring to it, at least the imperialism part.
Sort of like the bad connotation of entitlement that they keep trying to affix to Social Security.
What would anybody expect when it was left to the lenders to audit their own files (well, technically left to lenders to hire an ‘independent’ entity, but we already knew what that meant)? That they would find homeowners that were harmed and pay them damages? Perhaps a couple token homeowners for appearance sake. Otherwise, everyone knew it was a joke. The 50 state AG agreement has the same ‘independent’ review of past foreclosures, if I recall correctly.
I’m sure that ther are plenty of forensic accountants willing and able to do unbaised research to uncover mistakes and outright fraud; exactly why they will not hire any people competent enough to do this type of investigation, but they did during the savings and loan scandal. Much of law is based on precedent. What happened?
Ineffectual foreclosure audits are more evidence of how much stronger the banks are than the regulators. The OCC & Fed know that they can’t investigate mortgage servicers in a meaningful way. My hunch is that’s what changed since the S&L audits occurred twenty years ago.
Surely there must be someone in the US capable of doing a proper investigation.
I’m sure there are people who can conduct a real foreclosure audit, there’s just no political will to make it happen. The temp advertisement shows these audits are a sham intended to allow the banks to resume business as usual.
There are plenty of people capable of doing this work correctly. What’s missing is the will to make sure the job is done correctly. Absent this the banks will do the job for a low cost and even lower effectiveness. Why wouldn’t they?
This is regulatory puppet theater, with the motto of “What you don’t know, can’t hurt them!”
Yes, Levitin joked in an earlier post no bank would hire someone able to do the job like him.
I suggest you read his post, he walks through an instructive example.
You could have someone like Levitin set up procedures with lower level but still pretty skilled staff to go through files and flag certain types of information. You’d also need higher skilled people to look the signatures for fabrication (some of the robosigning was well executed and would take someone with expertise to detect fakery).
But as he points out, you’d ALSO need to go to borrowers and see what the facts were on their end. For instance, we’ve indicated, a fair amount of foreclosures are servicer driven, and in most cases, you’d not detect that from the servicer end.
That’s why the process defined in the consent orders can’t be fixed by having better people or the regulators execute it. You need a different process.
The Obama administration demonstrates an bottomless desire and need to mislead the American public. Here we talk about the larger mortgage/foreclosure debacle. It is also seen in its drive to deport undocumented Hispanics despite pretending to be for immigration reform. It continues with a Nobel Laureate for Peace who is increasing war almost everywhere. And finally, a president that couldn’t care less about the unemployed for more than two years now, when his butt is close to the fire, he is a born again employment fighter. Of course, there are many other examples.
It’s is a behavior typical to dictatorships.
Looks like our favorite banksters have gone and found themselves some of themthere loopyholes.
Doubling down on #FAIL. It’s what they always do.
YS:
It’s the “stress tests” all over again. Nothing I read about these reviews led me to believe they would be anything other than the “cover up of the cover up”.
IA
If we were to end the Fed would the OCC also be ended? The Office of the Comptroller of the Currency. What nonsense. And what other straw men used by the Fed would be ended? Would all of their fraudulent “bank” business be ended? I would worry that by nationalizing the Fed and the banks we will just nationalize all the fraud. Just how do we purge the system? We are living with a government that has hijacked consent. They don’t even need us any more. They never could manufacture consent-believe it or not we are just not that stupid-so now they have hijacked it. If civil disobedience is the answer, the answer that avoids violence, it is going to be a long process. An exercise in attrition with everyone trying to cut their losses. How depressing.
It was referred to in a Credit Slips comment as “Fraud on top of fraud.”
I think you’re both correct.
This is what happens when both political parties are owned by the same Corporate/Banking interests. The banks know they will never be prosecuted by the Obama or any Republican Administration so why not do what they want? Obama’s desire not to “look back” and move forward insures that more corruption will come in the future.
Many of the sins of US banksters are replicated elsewhere e.g. here in the UK. But this one doesn’t seem to have been (surely we’d have heard about it if it had been). Nor have I heard of it in Aus or NZ. Why? Why is this sin US-specific?
I’ll ask again , why is nobody going after these banks under the False Claims Act in regards to FHA insured loans? They need the same paperwork (original note ,mortgage and all assignments) that that can’t produce in court. A motivated lawyer could make a fortune . Claims submissions are under FOIA so getting the proof that the paperwork isn’t there is easy.
We paid off our primary residence in February and are in the process now of saving cash for our retirement home. Which we’ll buy only after a forensic title audit.
“I’ll ask again , why is nobody going after these banks under the False Claims Act in regards to FHA insured loans?”
Excellent question!!!!
Here. Let me try and answer you by way of metaphor.
Picture, if you will, Barack Obama on his knees, with his mouth wide open, with a HUGE penis in it.
Picture, if you will, the financial industry as a huge, corpulent and very wealthy and powerful man.
The huge penis in Barack’s mouth belongs to the “huge, corpulent, and very and wealthy and powerful man.”
Any more questions?
Too Big For Jail.
That must be a nice feeling. So it’s not enough to walk around knowing you can buy anything you want. They also know that they can literally do anything they want and there are no consequences. Sweet, a different kind of utopia.
Yes, the banks can pretty much do whatever it is they want. Like skip out on their TARP payments to the US taxpayer apparently (170 banks in that camp as of last count). Consumer misses a payment on his bank credit card, the penalties and interest rate skyrocket. What happens when the bank misses his payment to the US taxpayer? A friendly treasury official gets to attend the Board meetings. Serious consequences for consumers, no consequences for banks. Any wonder what all the anger is about out there?
The big societal hit will come if there are some successful suits over fraudulent foreclosures so that the title insurance companies start to back away from issuing title insurance. At that point, the mortgage market would probably start to seize up and house prices would drop as people would be less inclined to take the risk that their house may not be their house.
Title companies are already prepared for the title litigation to come and will deny coverage to homeowners. REO properties are sold with title insurance provided by the *seller*. The title policy is full of exceptions so the policy coverage is close to worthless. REO sellers pay for sham title because doing so prevents the buyer from ordering a real title report and finding out about the property’s title problems. Several years later, when the buyer discovers a title problem and make a claim to the title insurer, chances are it’s excluded from coverage so the claim is denied. Guess who owns the title agencies issuing sham policies? Usually the law firm that represented the bank in foreclosure owns a captive title agency. Since these law firms work for merely $695 per foreclosure, they make up for lost profit from legal fees by selling title policies. The scam just keeps on going.
The good professor has posted a follow-up to his first post with more detailed information found in ads around the country. He can speculate about which servicer is behind some of the ads but isn’t sure of others.
A commenter added to the tale by posting an ad from a temp legal agency looking for lawyer types who will work 50 – 60 hour weeks in the Charlotte NC area for the whopping wage of $20 an hour plus overtime.
They’re not only bastards, they’re cheap bastards.
when you’ve built a large building, say the colloseum at columbus circle, and it starts crumbling and getting old, there is ALWAYS a point in time where it is you abandon the building or destroy the building and build a new one, —because the danger and cost of renewing the building to keep it occupied is far more expensive then the other 2 options.
the same applies to the entire mortgage and securitization system.
30 year mortgages are over.
Adam Levitin ! Great Doozy !
Maybe if we have a law past or emergency “Task Force” equal to our country terrosiam laws, lets call it “Rainbow Collar Crime Act” that is destroying our country.They might think once! No! 3 and out ! 1 conviction ! If you think of how many lives are devastated and deaths related to this bogus scum still at work as we speak ? Being an “American” following our laws and rules of our country.This is a Rico Act ? that should fall under JAIL ! No plea bargains on the “American Dream” our roof under our heads.Quiet Gangsters ! Adam thank you for your time! In God We Trust ? WOW ! “Scum Money Bag” of our Country = Jail!!! http://www.youtube.com/watch?v=-xnaa4yEjgI
Regarding what PL said:
That’s really interesting to me, a potential buyer. I want to throw in here that when I was in the process of buying a house my real estate agent told me not to worry about having a lawyer of my own, as the title agency were lawyers and they’d answer any questions I had. When I began asking questions, in writing-email-prior to the closing date, they were reluctant to answer them. They seemed to be pretending not to understand what I was asking, regarding details in the closing paperwork. I had concerns about waiving all of my rights and giving them power of attorney, things of that nature. Finally, after a marathon runaround, I emailed them and copied a lawyer of my own. It was only at this point that I was told by them that they were there to represent the interests of the bank! I had no idea! They said, “I feel we should point out to you that our part in this is to protect the bank.”
Oh. Why didn’t anyone tell ME, and who is looking out for me? It was an eye opener.
The first word of their two word name is the opposite of “New,” should you care to avoid them.
I’m not sure what kind of scam was going on with the house I looked at, if any. The real estate gent steered me in certain directions (with the loan officer, inspector, and esp. insurance person, and she chose the title company), making sure to tell me it was up to me and she technically couldn’t.
The loan officer made a mistake on my paperwork which made me look like I had more of a savings than I did, but she was sure to point it out. I told her it was incorrect and her response was to shrug, as if it didn’t really matter.
In my last post I mentioned the evasiveness of the title company.
The inspection papers claimed the house wasn’t sold within the past three years, but the seller had bought the house less than a year prior according to property records with the state.
The interest rate hadn’t been locked in even though I had been told it would be.
The closing paperwork said I had to indemnify everyone but myself, hand over power of attorney to the title company and allow them to change whatever they wanted, whenever, and if I were ever involved in any kind of lawsuit, for ANY reason, the bank could repossess the house.
When I balked, I was told this is standard closing paperwork in the state of Tennessee.
Does anyone know if this is true?
I’ve tried to get a look at anybody’s paperwork but, incredibly, no one seems to have copies of their mortgage papers.
i would give my left nut for 23 an hour