Not-So-Dumb Consumers Shun OCC’s Bogus Foreclosure Reviews

Consumers seem to have wised up to the fact that the Administration is not on their side, particularly as far as housing is concerned.

John Walsh, the acting director of the Office of the Comptroller of the Currency, gave a speech today at the National Interagency Community Reinvestment Conference that had so many whoppers in it that it was hard to keep track of them all. But it also contained an important bit of information that suggested that homeowners aren’t buying the bank-friendly OCC’s pretense to be on their side.

Long-standing readers may recall that the OCC entered into consent decrees with 14 major servicers last April. The OCC went that route as a way to end run the CFPB, which at the time seemed to have the ear of state attorneys general. The CFPB was a threat because it was providing analyses at the state AGs’ request that suggested that the states had good grounds for seeking substantial damages from banks (note that the $20-$30 billion figure that had been leaked was mere disgorgement. Damages would have been on top of that). Can’t have that, now can we?

When the consent orders was released, Adam Levitin and yours truly focused on the rife-for-abuse idea of having contractors selected by the banks perform the servicer reviews. Why do we have regulators if they can’t be bothered to do their job? And predictably, Michael Olenick, Francine McKenna and your humble blogger found examples of foreclosure review contractors with glaring conflicts.

One component of the OCC program was “independent” foreclosure reviews that would be offered to borrowers to determine if they had been harmed by a foreclosure and provide restitution. You have to understand that this was never a good faith effort, even though HUD secretary Donovan trumpeted these assessments as an important part of “social justice.” The purpose of every new bank review process implemented since the Obama administration took office has been to go through the motions of being thorough (typically not convincingly, as with the first stress test and the Foreclosure Task Force demonstrate ) and give a clean bill of health. Having the OCC look at a whole passel of foreclosures and say, “See, the overwhelming majority were OK” would be an important step in turning the clock back to before the robosigning scandal broke.

Abigail Field reported that an insider leaked that the process was being managed aggressively so as to ignore borrower problems. I strongly suggest you read her post in full. A key section:

But here’s a few highlights to show how rigged the process is:

“I have found errors that should be moved up through the ranks, but am told “quit digging so deep”…”put your shovel away”…Focus on the questions “in scope”… The review forms are set up so no harm could ever be found. It’s equivalent of an attorney presenting his case to a judge with just 20% of the evidence.”


“The foreclosed victims don’t realize if they do not provide specific dates on the intake forms… their complaints are considered “general comments” out of scope.

The kicker? The forms don’t tell people their information will be ignored if the complaints are not dated.

Mandelman reports that the insider

“also says that the questions on Promontory’s form are worded in such a way that it makes it very difficult to ever find fault. For example, by using compound questions, he is often told to answer “no,” when the first part of the question would be a “yes.””

But this is who he’s working with and for:

some of the people brought in with me do not know the difference between a truth in lending statement, and a note. It’s a shame, these are your reviewers!!! The supervisors don’t want any trouble…they are mostly temps too, just trying to get a promotion to full time.

Sounds like no bailed-out bank will be held accountable and no homeowner compensated. Nice product you’re selling there “U.S.” Housing Secretary Donovan.

Indeed, Wells Fargo’s Promontory process apparently found no wrong doing in 9,996 cases out of 10,000 examined. The other four were sent to Wells Fargo for further review but came back as no problem. At least, 0 problems out of 10,000 files is what the insider’s supervisors announced to everybody. I don’t know if the supervisors were telling the truth or just trying to message everyone to not find any problems in any files. Either way it tells you the same thing: the reviewers won’t find anything wrong with the files.

With this as background, it’s pretty hard to stomach patent falsehoods like this in Walsh’s speech:

The enforcement Orders require mortgage servicers to hire – and pay for – independent consultants to conduct an Independent Foreclosure Review of foreclosures in process during 2009 or 2010, and make fair and impartial recommendations for financial remediation for affected borrowers. These consultants were screened so that they have had no previous role in reviewing the practices or issues they are being asked to review in the Independent Foreclosure Review. They are not subject to the servicers’ direction and control.

Let’s see…who chose these reviewers? The banks. Who is paying their bills? The banks. Who is a potential future client if all goes smoothly? The banks. And Walsh seriously expects us to believe the reviewers are independent, even before we get to the rampant conflicts?

The one sort of candid part of Walsh’s speech is where he discusses how the OCC servicer reviews were developed independent of the Federal/state mortgage settlement, but he manages to skip over how that came to pass.

But then we get this part:

Last November, the second prong of the Independent Foreclosure Review got underway with the kick-off of a separate process where borrowers who believe they suffered injury from improper servicing practices by one of the 14 servicers, can request a review of their case by the independent consultants. During the months of November and December, letters were mailed to 4.3 million eligible borrowers which provided instructions on how to request a review of their case as well as examples of situations that would be likely to involve financial injury. This direct mailing used several tracing methods to locate borrowers and only 5.6 percent of the mailings could not be delivered. In addition, a national print and online advertising campaign is being undertaken, in both English and Spanish, to make borrowers aware of the Independent Foreclosure Review. We are also working with a range of national community and housing advocacy organizations that are helping to identify minority media that can help publicize the Independent Foreclosure Review process.

Borrower counseling groups are also being encouraged to make their current and former clients aware of the reviews and help them file claims… And recently we extended the filing deadline to July 31st to allow more time for this expanded outreach to take hold, and for requests for review to be filed.

To date, over 121,000 borrower-initiated file review requests have been submitted.

Did you get that? The OCC has done a massive outreach, not just mailing but advertising in a number of targeted outlets and securing the help of community housing groups. And what was the response rate? Less than 3%. No wonder the OCC extended the deadline.

Yes, as Walsh makes clear in his speech, the OCC’s objective isn’t to investigate foreclosures but to put the foreclosure problem behind them, which is tantamount to covering it up. As reader MBS Guy noted:

If a borrower is fighting a foreclosure and submits their loan to the OCC approved reviewers, they are probably taking a big risk. If the reviewer finds no meaningful wrongdoing on the part of the servicer, then the servicer is almost certain to use that result as evidence against the borrower in their foreclosure challenge. Since the OCC hasn’t established any real standards for what a violation might be, it’s a total crapshoot for borrowers. Meanwhile, what court wouldn’t find persuasive an OCC sanctioned review that declared no wrong doing or no harm.

Also, what exactly are the incentives that the OCC are using to get borrowers to submit their loan for review? The possibility of some monetary settlement, the terms and amount of which will be determined at some later date. That’s just absurd.

I’d view the low participation rate as a good sign – even desperate borrowers no longer believe anything this Administration says regarding mortgages, banks,So or the economy.

So do your friends and contacts as favor. Circulate this post to them and urge them to pass it on to anyone who might be a candidate for the OCC foreclosure reviews. Warn them that it’s jerry rigged in favor of the banks and will serve to prejudice any legal action they might decide to take against them.

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  1. Conscience of a Conservative

    We have the same auditing firms that were around during the creation of the mess being asked to uncover that same mess, so no incentive there. We have regulators who were blind to the creation of the mess bein asked to investigate that same mess, so no incentive there. Who is going to investiate a crime where they themselves might be seen as abbetting that crime? Add to that an ethos that’s all too pervasive that we have to save the banks first and foremost or the economy goes down the tube and an even deeper seated notionthat the the economy cannot recover without “misplaced” faith in the financial system. Why be surprised?

    1. Susan the other

      And to take that thought one more step: It’s not just the “independant reviewers” who are aiding and abetting; the OCC itself is also aiding and abetting. This is a direct link to the highest levels of government.

  2. Jim A

    It doesn’t look well when the servicers feel the need to stack the deck so profoundly in their own favor. Considering how careless they have been with their paperwork and complying with the legal requirements to foreclose the surprise is that we don’t hear MANY more cases where non-defaulting homeowners were foreclosed on. That after all, is WHY we have all the red tape involved with a foreclosure. IMHO the OBVIOUSNESS of the whitewash makes them look worse. I have to think that it’s more about making sure that they don’t uncover grounds for the mortgages to be put back at par than preventing the disclosure of servicing abuses.

  3. John Bill

    The OCC is a joke. I filed a complaint with them regarding Charter One Financial and they did absolutely nothing.

    1. Loose Cannon

      They probably reported you to the FBI as a disgruntled consumer of interest, so all is not lost.
      (hah, j/k) Seriously these guys work for Banksters, you’d have to be working for a Bank to disagree. Johnny Dugan, Johnny Hawke, Johnny Walsh….Here’s Johnny!!! Actualy here’s Zach Carter:

      “The pre-emption of state consumer protection laws was a deliberate attempt to preserve the ability of the nation’s largest banks to earn short-term profits from predatory loans. Every major OCC-regulated bank–Wells Fargo, Chase, Citi, Bank of America and Wachovia–had tremendous subprime and no-documentation loan operations.” Let’s Steal!!!

  4. Teejay

    How can we conclude the low response rate(3%)
    means that homeowners recognize the “review”
    is a farce?

    1. Yves Smith Post author

      If you get a letter in the mail from a government agency saying you might get $ if you fill out some paperwork. wouldn’t you expect a decent response rate? Particularly if there has been tons of advertising too?

      1. Fake

        Scam artists always send mail implying their solicitations are on behalf of a Government agency. More sophisticated groups set up blogs that appear to be benevolent attempts to clear things up, a peculiar form of corporate management/entrapment.

        1. Yves Smith Post author

          They list a website in their material which consumers can use to check out their bona fides and aren’t asking for credit card info. And as I said, there has been accompanying advertising AND outreach through community and housing organizations.

          1. Jack Sprandy

            ‘If you get a letter from a Gov’mint Agency.’ Could the OCC issue NSLs with gag orders back in the earlier part of last decade?

  5. Starry

    Susan – so the OCC admits that there are (potential) problems in 4.3 mortgages? Is that how many f.c. so far? Does that tally include short sales, etc.?
    That’s a juicy number. Previously the feds would speak of lower ##s.
    4.3 million homes. That’s easily more than 10-12 million people.
    And the wonderkind at G.S. estimate that there could be 11 million f.c. in the whole shebang?
    30-40 million people could be displaced in the f.c. crisis? That is edging toward 10% of the population.
    A modern diaspora.
    Let’s ask Walsh and ‘lil Turbo Timmy about that….

  6. Anonymouse

    I can’t make the leap of logic that the low response rate is due to people knowing the review is a sham. Unfortunately a 3.5% response rate is pretty standard in direct mail campaigns. Plus, these are people who have been foreclosed on, it stands to reason the servicer could have an old address and they never receive the notice.

    1. Blogsters Clearinghouse

      “I can’t make the leap of logic” ‘I can’t jump over the fraud.’ What’s the reason illegal-debt collectors know where people live?

    2. Dave of Maryland

      Three percent reply is from cold mail. When you’ve got live people on the line, the response rate will be much higher.

    3. Yves Smith Post author

      Did you read this post? This is not a cold mailing.

      1. They did lots of accompanying advertising and outreach via community groups

      2. They went to some lengths to get current addresses (read Walsh’s speech on that). I adjusted the % response for the bad addresses, so the % response is on valid addresses

      3. People are being (effectively) offered money for doing some paperwork. This is different than the usual direct mail, where you are asked to SPEND MONEY, either on a current basis or to commit to some sort of subscription, etc..

      Not to respond says they don’t trust the process or understand how their rights might be prejudiced.

      1. Steve

        I thought you said Johnny was telling a lot of whoppers. Who exactly is being offered money by the OCC?

        1. Yves Smith Post author

          I have not looked at a mailer, but the high concept is we review your FC and if you were harmed financially, you’ll get a payment that reflects how much you were damaged.

      2. Steve

        BOA offered hush money to shut people up – is this related in any way or am I way off base? Jeeze, this wacky world wide web thingie.

  7. Susan the other

    And we all know, and more people are understanding every day, the title snafu is being hushed up. Even Racheal Maddow had a really good and informative rant on the subject with clips of Marci Kaptur. Who doesn’t love her? Also the recent declaration by O’brien and that clip of Jeff Thigpen (that was great, no?). Maybe we’re getting somewhere. Thanks to the relentlessness of being totally pissed off.

  8. starburns

    i don’t think that using the review process would harm borrowers to quite the extent the article fears. for one thing, use of the letters in court would give consumer attorneys a crack at how the consultants are actually conducting their reviews. if the reviews are intended as a wink-wink cover-up operation between the servicers and the occ, then i suspect that the banks will not want to invite the scrutiny of consumer attorneys by offering the investigator’s conclusions into evidence. if on the other hand, the review process is intended as a subterfuge to bolster foreclosure claims, i would expect a diligent consumer lawyer to find that out as well.

    1. ambrit

      Dear starburns;
      One question: Who among those already stressed out in all ways imaginable would have the resources left to retain a lawyer, or, find a ‘reasonably honest’ contingency lawyer?
      Now we know another reason the ‘elites’ have tried so mightily to define down ‘Class Action.’ Soon the only ‘class action’ left will be civil insurrection!

      1. starburns

        i was simply saying that if the findings from review process are being used to expedite disputed foreclosure cases in court, then an attorney representing a consumer will likely be the one to discover problems with the process. you’ll recall that both the MERS morass and robosigning were uncovered by by private attorneys representing paying consumer clients in foreclosure cases.

        1. Yves Smith Post author

          With all due respect, this is naive. I assume your only contact with litigation is TV and maybe small claims court.

          How is a borrower on a single foreclosure going to challenge a review process by the OCC and prove it’s bogus? Tell me how he gets authority to depose people at the OCC and the reviewers. They’ll argue its’ regulatory, confidential, and they checked the reviewers for conflicts.

          And even if an attorney DID get permission somehow, this is millions of dollars of legal work and the presumption will still be in favor of the OCC. Look, the legal on a contested foreclosure on chain of title issues quickly gets to several hundred thousand in no time (the FC defense attorneys write off a lot of their time)

          1. Rat Bag

            ‘Give it up! It’s hopeless! It’s real ‘spensive! Banks always win! Get real! You can’t dance with the OCC! I’m the man! You have no chance, I know these people! You can’t handles the truth I tell’s ya’

          2. starburns

            i’m flattered to get a response from you, yves (although I’m sure you’re long gone by now)! i feel slightly more important.

            of course it’s expensive, but it is crazy to assume that you could not manage your time and your costs to keep them somewhere south of one milly. a foreclosing plaintiff, for instance, isn’t going to be that interested in putting up that kind of a fight in a typical foreclosure case; the longer the case drags on, the longer the borrower stays. maybe some foreclosure attorneys write off their time, but people who are not making a house payment can often pay their attorneys something.

            and you would be deposing third party contractors, not the comptroller. as far as the individual investigations go, i think the occ is completely out of the picture. anyhow, you would effectuate the deposition by subpoenaing the consulting firm.

            again, this all assumes that a foreclosing servicer tries to admit the third party review into evidence to prove the fact that nothing untoward happened. if it does, then you’d have a right to test the reliability of those conclusions before they are used against you. for one thing, the letter standing alone is hearsay. the servicer will have to bring in a witness or affiant to lay the foundation. and that person has to have personal knowledge of the process that created the record. so you’d start by exercising your obvious right to depose an opposing party’s affiant. i don’t think there’s a court in the world that would prevent a party from deposing a witness or an affiant against him/her.

            granted, the average pro se defendant will have a hard time doing this. but let’s not kid ourselves: pro se defendants are boned, affidavit or not.

          3. starburns

            oh and i agree it is ridiculous to entertain the notion that, say, promonotory doesn’t have an obvious conflict in its review of wells fargo. the engagement letter contains well over two blotted out pages documenting past dealings between them. i’m amused that these are characterized not as the basis for a conflict, but as the basis for “institutional knowledge” that will help ensure the success of the review.

            to make things even more interesting, promonotory’s counsel gives consumer finance compliance advice to wells! it is conceivable that the firm guiding promonotory’s review is itself responsible for signing off on the very practices that necessitated the review!

  9. 2little2late

    “i don’t think that using the review process would harm borrowers to quite the extent the article fears.”

    What to date hasn’t harmed the borrowers? Has there been anything of any signifigence from anywhere that has aided the mortgagor’s plight against the continued frauds, promises to the contrary aside?

    In the past whenever a borrower wrote the OCC with banking complaints, the OCC would simply re-lick the envelope and send it on to the offending entity. “Don’t worry Ms. Hen. We’ve alerted Mr. Fox to your issues, and to your whereabouts”.

    I got one of the reviews and quickly tossed it into the compost pile. I want nothing to do with any of their best intentions, as time and time again they’ve proven that their goal is to appear as if they’re doing something. I believe Obama’s open mic night with Medvedev might as well be the same deal with foreclosure fraud…. “It’s an election year”.

  10. Wake Up America!

    I was on the unfortunate end of a servicer-driven foreclosure. One of the first things I did after securing an attorney was to file a complaint with the OCC. I must say the OCC is the most inept organization I have ever dealt with. From the start, they gave the impression there wasn’t much they could do to help persuade the TBTF Servicer/bank to correct their errors and play fair. Every month I had to send them copies of correspondence I sent the servicer via the mail and fax. There is one fax line – repeat, one fax line – at the OCC for consumers. And when I called weekly my file was never updated to reflect the records I had sent. Call-backs were promised but never received.

    After 5 cancellations (servicer promised to fix their problems but returned my payment each month) my property was sold back to the TBTF bank on the courthouse steps. Even though I lost my home, I continued to press the OCC for a letter advising me of their findings. Three months after the sale was completed I received a letter from the OCC advising the bank’s response was addressed to them and therefore, was confidential. I kid you not. 13 months after my case was opened the OCC closed my file. When I called to request a formal reply – in writing – I was advised one was forthcoming. 17 months have elapsed since the date of my complaint and I am still waiting. The OCC has my new address but I have never received a notification concerning the review process.

    My advice to anyone considering filing a complaint with the OCC – don’t wast your time and energy. Same goes with your state AG. The game is rigged.

    I am surprised there isn’t more chatter about the heinous “Cash for Keys” program. In orde to get your check for a measly couple grand the soon-to-be former homeowner waives all legal rights. No going after the servicer, investor, foreclosure attorney or realtor. The realtor hired by Fannie Mae was shocked I wasn’t willing to give up my rights to vacate my home of almost two decades for $3500. And I had to be out in 7 days.

    The servicers, GSE’s, attorneys and realtors all prey on the desperation of the foreclosed. The foreclosure crisis should be one of the top discussion items in the coming election. Sadly, it barely gets mentioned.

  11. freedomny

    I don’t have a mortgage on my property….but I am not 100% sure that they won’t find a way to put me into foreclosure….

  12. Ms G

    Agreed — this post should circulate virally and hopefully reach as many recipients of the scam offer as possible. It the OCC review offer were a pharmaceutical product FDA would have required a Black Box warning on it (indicating risk of potentially life-threatening adverse effects).

    Another public-safety warning that should be circulating to OCC’s intended “client base” is the Harper’s story illustrating that staying in the house and telling the bank to prove it owns the note can be a far more beneficial to the homeowner than dealing with the banks on their terms and under their rules of the game.

    1. Brittany

      Scam? Seriously? Check your facts instead of reading blogs from someone who obviously is on the low end of the Dunning-Kruger Effect. God forbid the banks would offer to review the loans in foreclosure for free. I mean seriously? Half of what is in this blog is not true, for example Promontory is not just saying no harm, they did a complete revamp and are asking for everything and are looking for any harm possible. Those 10,000 files are being re-reviewed they have not made a decision on any of them, so right there false information. But go ahead, believe whatever someone on the internet tells you, this guy doesn’t even have proper grammar!

  13. Fleur

    Brittany, the tone of your posts are extremely defensive and mean-spririted. There is no dispute the OCC abdicated its regulatory responsibily. There is no dispute fraud was commited against people employed by servicers and foreclosure-law mills were pressured to administer fraud in order to keep their jobs and these people only spoke out after being let go from their jobs. Thank you, Ives Smith, and all the others like you for reporting on these facts and for untangling the webs of skewed facts and figures that have been and are still being reported. I hope my grammer is o.k.

    1. Fleur

      Clarification: There is no dispute fraud was committed against homeowners, municipalities, and courts.

  14. Chris

    Since December 2011, has anyone received any positive response from the Independent Foreclosure review?

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