Even American Banker is Savaging the OCC’s Mortgage Settlement

I couldn’t bring myself to dial into a conference call with the OCC yesterday the details on the payout of the mortgage settlement, figuring the propaganda to information ratio would be unacceptably high. That decision appears to have been correct, based on a new American Banker article, since I read between the lines that they at most summarized documents released last week.

It’s clear the OCC is winging details it should have nailed down before settling. The excuse it offered in shutting down the consultant reviews was that they’d be able to get money to wronged homeowners faster. But since we have no payout date for this improvised procedure, it ins’t clear how much of a benefit the banks will get on this front. And homeowners were much more interested in getting a hearing of their case and an appropriate payout. Of course, the whole procedure was so stacked against them that only the most egregious cases had any hope of meaningful restitution.

The real excuse was that the reviews were becoming embarrassing, and secondarily, costly. Our sources indicated that ProPublica had gotten Bank of American, Promontory and the OCC in a tizzy by reporting the truth, that the reviews were not independent, and they were scrambling to change procedures. At PNC, the team was told that all its work prior to October would be thrown out due to lack of independence. On top of that, both at PNC and Bank of America, the reviewers were told relatively late to start validating third party charges (most important, find invoices supporting attorneys’ fees). Many did not exist, and this is after the temps were also often finding implausibly and impermissibly high attorneys’ fees). So exposing systematic servicer fee-gouging was something to be avoided.

The OCC’s fundamental problem was it has mistakenly raised expectations that the reviews would be real. Making a bad situation worse, neither the OCC nor any of the consultants had the foggiest idea at the outset what it would take to do the reviews adequately. But the excuse that the reviews were costing too much was spurious. If they really were coming up with low error rates, as the banks asserted, they should be delighted and eager to see them through to completion. In addition, the amount they owed the borrowers was the amount they owed the borrowers; the cost of the exercise should be beside the point.

The latest revelation is that the OCC still has no idea when or how much it will pay people. It has reaffirmed the old top payout category of $125,000, and has reduced the payout categories from 13 to 11. It further says everyone will get some money and that it will review payment amounts. Borrowers will be slotted into various categories and the payments will be based on how many fall in each category. So does that mean if you suffered a type of harm that was widespread, like HAMP trial mod abuses, you get less because a lot of people are similarly situated? That is sure what is sounds like. But with the banks making the call, with conflicted servicers who never finished the work providing input, and the no-nothing, bank friendly OCC looking over bank shoulders, who are we kidding? Remember, borrowers have no input and no right to appeal.

Barbara Rehm, in “OCC Bungled Foreclosure Settlement from Start to Finish,” is scathing. Some extracts:

The government’s deal with 13 servicers to end the unwieldy review of 4.2 million mortgages affected by the 2009-10 robo-signing scandal may indeed get money to borrowers faster, but it will not ensure they receive more money.
That’s because the government does not know which borrowers suffered what degree of harm.

The settlement should fit the harm, but the Office of the Comptroller of the Currency is making the harm fit the settlement…

Last week’s changes revealed that servicers will get credit toward the $5.7 billion total if they provide assistance to any borrower — not just the robo-signing victims of 2009-10. This assistance must be delivered by Jan. 7, 2015.

That’s yet another reason why Curry is wrong when he says borrowers will receive higher payouts under this settlement.
Either the Comptroller’s Office did a lousy job negotiating that part of the settlement or it just hasn’t explained it very well. The New York Times and the Journal have sunk their teeth into this story and report that the credit the servicers will get for foreclosure prevention will greatly exceed their actual costs.

Unless the Comptroller’s Office comes up with more answers fast, this snafu may consume the agency. And that would be bad for bankers.

What the industry and the regulators need most right now is trust. They need the public to believe that they are making sound decisions and doing the right thing.

This foreclosure settlement demonstrates a failure on both fronts.

One problem is American Banker accepts the consultants’ assertion that they were close to delivering some preliminary results. That’s just not true on Bank of America. Only 4800 of at least 140,000 review letters had been completed, and since certain tests were prioritized over other, that meant the files that were done were not a random sample. PNC was in such disarray that their claim that they were further along is just not credible.

And the other part that would be nice to believe but really does not hold up to scrutiny is that the bad smell of this deal hurt the banks. Really? They are already hated and distrusted. This is just another is a long list of offenses. The question is whether the OCC’s willingness to prostrate itself on their behalf will finally lead to a real shakeup at the agency. Unless Congress and the media exerts a lot more pressure, the OCC will continue to act as the banks’ most zealous protector, perhaps less clumsily in the future.

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  1. Mark P.

    I am weary of the ‘robo-signing’ lie.

    What Hugh says — the correct term is fraud. Fraud. Fraud. Fraud from top-to-bottom. Systemic fraud. Fraud on a massive, historic scale.


    1. keepon

      With the Wiseguys’ arrogant ‘simple fixes’ for the frauds, the cesspool broadens & swallows complicit government agents. May Bill Black’s ‘Fraud begets: MORE fraud’ haunt them forever & ever! POTUS, AG, FBI, Judges, Bank cops…any other protectors of the People want to step up ‘pit’ & hurl themselves into the pool? Shouldn’t SOMEone be arresting SOMEone for attempting to drive the getaway vehicle? Why…I do believe it’s swallowing the entire Coup.

    2. Aaron


      Best to look at these things from 40,000 feet or above. Closer inspection may cause severe blindness and/or brain damage.

      Fraud from sea to shining sea.

  2. jake chase

    The idea of the foreclosure settlement was to protect the banks, not the homeowners. The banks will now distribute confetti funnelled from the Fed, and individual homeowners will get what they get. A few will get a lottery prize, most will get chump change. Nobody knows the basis for the awards, which are just a propaganda exercise anyway. Did you really expect anything else?

  3. Procopius

    I find it extraordinary that with a system so thoroughly designed to cover up wrong-doing they still managed to find (and report) so much. It is appalling that they discovered 700 military families had been foreclosed on, on violation of one of the clearest, easiest-to-understand, unambiguous laws on the books. I am still wondering what happened to the chain of command (I’m retired military), why were these illegal foreclosures allowed to continue? I recently saw a quotation from a Reserve JAG officer who said they knew about the abuses, they notified the banks, and the banks blew them off. That’s it? They allowed their troops, serving in a hot combat zone to be distracted and frustrated because the banks didn’t listen to them? Does the law not provide an enforcement provision? This is a law that has been in force since 1940!

    1. jake chase

      Don’t be surprised that the troops aren’t protected, even by the laws specially addressed to their status. The only place troops are special to our elite is in the commercials pushing all kinds of drek by tugging heartstrings and evoking patriotism.

      In the real world they are just victims in uniforms, and yes, I served too, since you asked. That’s how I learned how it works.

      1. Nathanael

        FWIW, this is why I know that the current kleptocracy is unsustainable.

        In Burma, the military junta treats the military as an overclass. The military will therefore back the junta when push comes to shove.

        Here, our elite treats the military like dirt. Therefore, when push comes to shove, most of the military will not be on the side of the elite.

    2. NotTimothyGeithner

      In 1940, we had a saner legal system/Administration and tax code. Theft on this scale wouldn’t be rewarded or would just be appropriated by the IRS. I sincerely doubt the FDR Administration and its Congressional allies could have imagined a Democratic or even Republican Party which couldn’t grasp the basic optics and necessity of enforcing what amounts to a minor issue when the scale of the banks is considered.

      Much of the enforcement mechanism comes from the Attorney General’s office and by extension the President. At some level, the President decided to protect the banks, and high level prosecutions against banks abusing service members would directly threaten the bank in the eyes of potential and existing customers. Americans may treat wars and soldiers like sporting contests and disposable commodities, but like putting up a yellow ribbon, Americas will do an easy thing to make themselves feel good.

      I’m convinced the W. Administration would be parading their prosecutions of this ad nauseum if the story had come out when they were still on the job because they understood the appearances of governing were necessary.

      1. David Petraitis

        I sympathize totally with the sentiment that serving military personnel should have protection from foreclosure. It does seem a bit out of place to make a case of military exceptionalism when the fraud was so pervasive that no class of homeowner was spared. It is probably an underestimate that 700 active duty were thrown out of their home as well due to the systemic underreporting.
        When the JAG corps made complaints to the banks and were blown off they could have persisted with support from the brass. But… They would have had to push the cases to the DOJ, since they would be tried against non military defendants. And we know Lanny Breuer’s level of support. The brass probably made some personal, career decisions based on a thought of what their post-military job options might be if they pressed military fraudulent foreclosure cases against a bank with a decidedly cowardly DOJ and government to ‘back them up.’ The revolving door works for the military as well as politicians, as Eisenhower well knew.

        1. NotTimothyGeithner

          Although the issue was pervasive through all classes, its important to remember there is a very clear law about military families serving abroad, and as we are reminded on a routine basis of the “war on terror,” this seems like there is a simple solution. The banks pay a nominal fine and restitution with someone being blamed. The absence of prosecution or at least corrective action from the government is utterly unacceptable. There is no room for “in this case…yada…yada…yada.” This is simply banks breaking the laws and the DOJ doing nothing despite being informed.

          Its not military protectionism as much as strategy. Choosing battles and symbols is important. A few months before Rosa Parks decided to stand up by sitting down, a single, mother type did the same thing on the same bus line and was more or less shoved off the bus. Rosa Parks wasn’t a random old lady. She was a leading member of the local NAACP. The whole thing was a set up with a carefully crafted image of a dignified community icon being brutalized in favor of man who should have been offering his seat to the frail, elderly woman.

          All these Republican assholes can’t say the deployed soldier is a dead beat without looking like an asshole. A random foreclosure might be a deadbeat. I’m not opposed to foreclosures on principle, but we should work with people especially ones who “protect our freedoms” “best brightest” “blah blah blah…my son learned how to shake hands…” that kind of stuff.

          As far as this issue goes, no one remembers existence of the original single, mother who wanted to keep her seat. Everyone remembers Rosa Parks because no one could whisper that it was, “slut, single mother whoring it up.”

  4. BillyBob

    “Remember, borrowers have no input and no right to appeal.”

    Someone please explain to me how OCC can preempt and extinguish the right to file suit against banks, servicers at al.

    1. Westcoastliberal

      BillyBob, they’re not saying you can’t file a civil suit. Good luck finding an attorney who has a clue, will take your case, and whom won’t demand a $10,000 advance retainer.

      1. robert wade

        If you live in California and want to sue than I am in the fight and I am tired of the tyranny myself. I am not an attorney but have knowledge of law and how federal courts work, but have no friends that are judges. (disclaimer). I have some training in law and procedures. I have won the right to stay in my home and avoiding a foreclosure in Federal Court in 9th district of Sacramento, Calif. So if you really want to fight and know what needs to do this, than contact me at waderobert65@yahoo.com or cell ph. 209-242-4484 providing that you have a steady hand and calm nerves in battle and totally committed. Robert Wade. Pro Se Litigant.

  5. briansays

    today’s large banks are the equivalent of the organized crime families of the 20’s and 30’s they have simply done a better job buying government protection so have to resort less to violence to achieve their ends

    1. Ms G

      Please do not limit the analogy to an organized crime family to the banks.

      The Mafia family structure that you correctly reference encompasses not just the banks (actually, people who run those banks) but, integrally, the Government (from the President, to the Treasury Secretary, the “regulators” (OCC, et al), and the *people* running all the other agencies (from HHS and HUD to DOD and DHS).

      The Government is the vehicle through which all wealth that we create as workers is funneled to the financiers (and the insurers and the real estate developers). And the Government is also the enforcer who takes out any mafia competitors who dare to claim some of the pie for themselves (e.g. Cosa Nostra).

      Just clarifying.

      1. Nathanael

        Remember that “the government” is not one unified mass.

        This is one of the two great mistakes of every consipiracy theorist. The first mistake: thinking that THEY’RE ALL IN ON IT TOGETHER!

        No, there are a bunch of different squabbling organizations.

        The second mistake: assuming that the conspirators are SMART, COMPETENT PEOPLE.

        No, they’re usually half-idiot loons (who can still do a lot of damage).

        So my point here is this. The DoJ, the OCC, and the Treasury are clearly completely corrupt at this point. Your best allies against them, however, may be state officials, local government, or other federal agencies — they are NOT necessarily in on the same conspiracy.

  6. Susan the other

    In view of the latest (Wells) expose yesterday and the above post on the IT mess, I’m thinkin maybe the banks do know their only option is to quit the mess and start over. The tidbit about LPS software that is “resolving” titles by simply deleting any allonges that come after the MBS trustee, sounds like the way things will go. To start over in a pro bank way, that is. They will just do some code that fire-hoses all the confusion, replace it with fiat accounting, impose this information, fraud and all, on the legal system, and call it good. It is getting more blatant by the hour.

  7. ep3

    yves, i am getting a mortgage under obama’s settlement. I get $3k towards my down payment. And obama is nice enough to call this taxable income to me.

  8. Westcoastliberal

    As one of the injured homeowners and also one of the 400,000-odd who spent countless hours assembling documents into chronological order to present my filing based upon the information OCC provided, I want to know how they intend to compensate me not only for the injury caused by Chase Home Finance but also for my time?
    Here’s my feeling at this point: Lied to. Cheated on. Treated like dirt.
    I now yield the soapbox.

  9. chicagogal

    How many people forwarded the claim form to their foreclosure attorney because that’s what they were instructed to do?

    Out of those, how many of those attorneys actually filed the claim for their client and how many blew it off because they didn’t know anything about the “deal?”

    Lastly, how many people are completely left out of this “settlement” because their bank/servicer is one of the 4 who chose not to be included? The last I heard on this is that those homeowners would move forward with a review, though how that is supposed to happen considering the changing landscape of the procedures utilized is beyond me.

    So far I’m 2 for 2 on being included in any “settlement” since my loan was owned by Freddie Mac and serviced by GMAC/Ally. So no help from the 2012 AG “settlement” and no help from this one. GMAC didn’t have to follow Freddie’s servicing guidelines regarding a deed-in-lieu agreement and Freddie not only got my home to sell for whatever they can get, they got paid on their PMI claim too while the insurance company came after me for collections on that payout! Pretty good return for very little work.

  10. valerie

    i have 6 boxs from a class action from 2001 with f.h.a doing it than was left with me from attorney who had it he never returned for it in 5 years its the complete thing some day i will read it all and see who knew what on the deal very sad so many years of ripping people off

    1. OurBroker

      More than a month ago, on RealtyTrac, it was asked:

      >>>Why should Smith get $125,000 while Jones receives $500?

      >>>Should a borrower who defaulted on a loan get anything if neither the lender nor the servicer did anything wrong?

      >>>If the folks across the street were wrongly foreclosed and the value of your house went down as a result do you get anything?

      >>>If you were wrongly foreclosed in 2008 how much will you collect?

      >>>Does “hundreds of dollars” mean less than $500?

      >>>What happened to awards “plus equity” for borrowers who were wrongfully foreclosed? Now, apparently, awards are limited to $125,000 and no equity regardless of how egregious the abuse, except if a borrower goes to court and wins more.

      >>>Which HOMEOWNERS negotiated this deal?

      That would be none.

      See: http://www.realtytrac.com/Content/news-and-opinion/foreclosure-reviews-insufficient-for-harmed-homeowners-7592

    2. valerie mortz

      it has natinal city attorney responce attorney gerneral indiana info all findings of fraud everything 13 news in indy may run a story on it hfa loans va loans loan numbers it is ready for trail attorney never showed to court

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