Quelle Surprise! GAO Finds Foreclosure “Request a Review” Materials Too Complicated for a Lot of Borrowers

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Readers may remember that one of the outcomes of the robosigning scandal was that mortgage servicers entered into consent decrees with the OCC and other regulators in early 2011.

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. The servicers were required to do “outreach” to borrowers who might have suffered to give them the opportunity to request a review. 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.

The participation has been underwhelming, given the theoretical upside to borrowers. After extending the deadline twice, the servicers got a 5% response rate. That might seem pretty good by the standards of direct mail, but the benchmark is probably the takeup rate for class action litigation related mailings, which is presumably much higher than the norm. The servicers did two mailings, advertised (web, print, radio), and did outreach in some communities.

The GAO, which was asked to look into this matter, came down on the servicers for their failure to develop jargon-free, readable materials. Their excuse was that they felt pressured by deadlines and couldn’t take the time to test the letters in focus groups. The GAO was not impressed with that, and referred to Federal “plain language” guidelines that stress the importance of avoiding jargon and writing to the level of the audience, which in the US means at the eight grade level or lower. By contrast, the mailings were scored at the second year college reading level (roughly that of this blog).

Now of course, one should never attribute to malice that which can be explained by incompetence. But let’s face it, servicers have every reason to throw a spanner in the works of these reviews, since more successfully completed review forms not only means more work and expense for them, but it also can lead to more payouts and more proof that they were incompetent at best, predatory at worst. And there is ample evidence they’ve been using every trick at their disposal to do so. From a post by Abigail Field:

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…

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.

So while it’s useful to have the GAO expose how the review process is certain to be missing a lot of people who ought to be included, that assumes they’d actually get a fair hearing. Perhaps they are being done a service by not having their hopes raised and then dashed.

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  1. Charles Reed

    Speaking of Wells Fargo, there exist a situation that every loan that they service that was place into a Ginnie Mae pool by Washington Mutual Bank (WaMu) and was later foreclosed is done illegally because the Notes in there Blank endorsed form don’t carry with them any debt because by law Ginnie Mae could not purchase a home mortgage loan.

    Now that the US Treasury OIG preformed the Audit 12-054 which in short said of the foreclosure crisis the OCC could not find water if it were swimming in the ocean. As crimes have been pointed out to the OCC who is suppose to have regulate these banks, who wants out a deal with some independent group who suppose to find what fulltime employees of the OCC could not find any wrong doing because the did not understand that it is each individual has a process for titling the loans and process for foreclosing of the loans.

    As the Massachusetts Supreme Court ruling in Eaton v. Fannie Mae hit the head on the nail that the court expects that the party requesting to foreclose must both own the debt and be in title as owner of the debt!

    The naked truth is that Fannie Mae has come out with some tell of an automatic transfer of a defaulted mortgage loan into the name of the Servicer, however where in a State’s statute does it grant a automatic transfer. What the ruling exposes for Ginnie Mae is the fact that even though they have physical possession of the Blank Notes under UCC 3 and do own the Notes they are not owner of the debt they did not purchase so they cannot be “holder in due course” because they are not owed monies by Borrowers who in no way obligated themselves to Ginnie Mae who is not a Lender able to call the Notes due because they have not lent a single red cent.

    So for Wells Fargo reviewer in Promontory to not take every WaMu pooled Ginnie Mae loan foreclosed and automatically pay restitution because it is a fact there was no Lender to claim ownership because in a legal procedure of signing endorsing the mortgage loan Note in Blank and freely without selling the debt, worked to wipe out the existing debt because it separated not only the debt from the Note but the Note from the title with at the local land recording offices Mr. Blank cannot request to be in title because he is BLANK!

    Like it or not any loan placed into a Ginnie Mae pool is a home that was and is free of a debt because very simply Ginnie Mae not being a Lender did not create (originate) the loans or purchase them, so borrower are not indebted to an party that not financially invested in the loan which is the only way a lien is created!

    1. indio007

      You hit the nail on the head. Regardless of all the other shenanigans, you have to do more to transfer the debt than make a bogus endorsement.

      It has to be a good faith PURCHASE for value without notice of defect or defenses, made in the ordinary course of business and AND NOT OVERDUE.

      Every single one these notes are point blank non-negotiable.

    2. LucyLulu

      You are correct. Ginnie Mae does not own the loans, only guarantees them. They are owned by the trust in which they are located, with trustee acting as trust representative. Neither the trustee or the sponsor that sold the loans to the trust is Ginnie Mae, both are private entities.

      I don’t believe Ginnie Mae is claiming to own any debt, though I could be wrong. In any case, they shouldn’t be. There is a document custodian who has physical possession of the loan documents, not Ginnie Mae. If possession is needed to become “holder of the note”, the foreclosing party (trustee or servicer) can request the note from the custodian.

      Hopefully no bubbles were burst.

      1. Charles Reed

        Understand that in a Blank Notes situation with Ginnie Mae there is no purchase by Ginnie Mae or a Trust as Ginnie Mae cannot purchase a home loan. However as a Blank Note belongs to he who has physical possession of the document at all times because the note itself is blank and is thereby called a Blank Note.

        Because Ginnie Mae or a Trust is in possession of does not mean a thing unless they can prove they purchase the debt. Hopefully no bubble were brust in believing that the America public would continue to believe the false tail provided by the Servicer fraudulently foreclosing on property that no one has a financial interest in.

  2. Guy Fawkes

    I’ll tell you why the response has been underwhelming.

    First, why would ANYONE participate when these “independant reviews” are funded by the banks doing the harming?

    Secondly, the questions that borrowers are required to answer are sometimes two-part, meaning that the answer to the first part is NO, and the answer to the second part is YES. How do you answer?

    Thirdly, any borrower providing additional information to the harming foreclosure servicers is totally self-defeating.

  3. kravitz

    There’s still that issue about losing legal rights by participating. You know what’s up when lawyers are not advocating for getting a review. Not because they lose business. Because there is no sunlight. By several recent cases, it’s obvious much more bad bank behaviour comes out in court.

  4. Doug Terpstra

    Let the record show another critical follow-the-money (not the teleprompter) post. As you note, “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 … and give a clean bill of health.” And as Michael Olenick wrote here in January:

    “…at every level, the President has failed ordinary Americans. Even the most egregious behavior results in dead silence … we don’t even get a yawn. Every program has been an unmitigated disaster, especially HAMP. When Administration figures do intervene their influence is overtly skewed in favor of the banks.”

    Ditto for HARP, TARP, JOBS, ACA, etc; the track record of the Obama regime is long and damning. Hence, at this point, one should never attribute to incompetence, ignorance, or cowardice that which is better explained by psychosis, avarice, sadism, and powerlust. Machiavelli and Sun Tzu eat your hearts out.

    BTW, the GAO link goes instead to an FSA notice to Barclays. I’ll bet the servicers application is “entertaining”.

  5. charlie

    I don’t like to criticize commenters writing but these sentences make me want to hit my head on a nail. Remember, this is supposed to be 2nd year college level.

    1. Enraged

      True. Nothing better than short sentences, with appropriate punctuation. Always better than intellectual masturbation…

  6. Westcoastliberal

    Using direct mail for this is idiotic because this target market was mostly evicted from their homes, so even a forwarding address has expired. It would take a considerable effort to reach them through the mail. Better approach is broadcast & online media, of which I’ve seen zero.

    The other reason they keep pushing back the date is, they’re not even considering any of the cases which have been filed UNTIL after the deadline for filing. I sent my package in early Dec 2011 and have zero result. I complained about that to OCC and got a non-response.

    This is a scam just like “HAMP” and that’s why people aren’t applying. For those of us who did, the result has been zero.

    As far as the paperwork being too complex, that depends on your personal experience. Right now, I have more knowledge on Foreclosure defense than most lawyers in my county, but that still does not good in court. The judges are totally bought & paid for by the banksters.

    There is no justice in this country anymore for the little guy.

    1. LucyLulu

      Hmmm, interesting.

      Once he collects the evidence, does he have somebody to prosecute the case, along with the necessary funding?

  7. 7towers

    What about Junior mortgages, Wells Fargo holds a junior on my house. Wells Fargo has been completely impossible to deal with and I’m of the tenacious type.

    I was working with the primary mortgage holder BAC, only during the whole process of working with primary , Wells Fargo inundated me with legal notices , and foreclosure notices complete with Sheriff sale dates. Contacting Wells all through these various legal stages I was continually told told by Wells Fargo that I need to wait until finished with primary mortgage holder (well DUH !) and not to worry about these notices and sale date. Yeah Right!
    There is much more to this story, According to Wells Fargo I was served Forclosure papers in some town in Georgia. I live in Pa. But the record states that the Sheriff there in some town Georgia served me these papers in person sworn by him .. This is all public record..
    Besides the above batshit crazy, After grueling phone calls, faxing and mailing papers this company withdrew any offers to work with me their reasoning is that my husband took out the second mortgage, and since he no longer lives at this address they claim its not owner occupied.
    All this over 23,000 dollars..

    Yet my name appears on all the nasty legal documents sent here as well as the ones that were were served to me and said husband at some town in Georgia.

    Can I declare bankruptcy for a junior ?
    Thanks for letting me rant and any advice is welcome.
    Great site by the way thanks for being here!!

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