Yearly Archives: 2011

Gretchen Morgenson has an important piece tonight which describes how US Trustee Program, which is the arm of the Department of Justice which oversees bankruptcy courts, has found ongoing servicing abuses in bankruptcy courts which are an order of magnitude worse than claimed by mortgage servicers and their mouthpieces among the Federal banking regulators. And it’s funny how a real prosecutor has managed to find significant problems in a mere six months, when the 50 state attorneys general effort, which has undertaken no investigation, is rushing to get a deal done. If the leader of that effort, Tom Miller of Iowa, instead had gotten to work when the effort was formed last October rather than having tea and cookies with the Treasury Department, they might have something to show by now.

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.