I didn’t realize that the Fed and the OCC were getting into the junk mail business. The Wall Street Journal reports:
“Bank regulators in April ordered 14 large mortgage servicing firms to fix problems in their foreclosure-handling processes. [...] The industry has now started sending letters to around 4.5 million borrowers who were in some stage of foreclosure in 2009 or 2010.”
This is meant to be part of the remedy to address the widespread
accusations admissions of robo-signing that several U.S. housing lenders engaged in in the last few decades. Wikipedia reminds us that robo-signing
“describe[s] the robotic process of the mass production of false and forged execution of mortgage assignments, satisfactions, affidavits and other legal documents related to mortgage foreclosures and legal matters being created by persons without knowledge of the facts being attested to.”
After a year or two of consumer advocates raising hell about these processes, the Federal Reserve, the OCC, the FDIC and the OTS convened a task-force to examine the issue. (Note: this effort is separate from the state-by-state agreements currently being negotiated.) They did an on-site review of files and practices at 14 of the big mortgage lenders…that lasted for all of eight weeks. To give you an idea of how rigorous this review was, here’s the process as described in the final report.
“[...]examiners evaluated each servicer’s self-assessments of their foreclosure policies and processes; assessed each servicer’s foreclosure operating procedures and controls; interviewed servicer staff involved in the preparation of foreclosure documents; and reviewed, collectively for all servicers, approximately 2,800 borrower foreclosure files that were in various stages of the foreclosure process between January 1, 2009, and December 31, 2010.”
So the task-force looked at a whopping 2,800 of the banks’ own files and compared them to…nothing. Certainly not to the foreclosed-upon’s version of the facts. Mmmmkay. Can’t help but agree with Yves Smith’s assessment: “This initiative is regulatory theater, a new variant of the ongoing coddle the banks strategy.” Even the mealy-mouthed Government Accountability Office had this to say (as quoted by Yves):
“The reviews did not include an analysis of the payment history of each loan prior to foreclosure or potential mortgage-servicing issues outside of the foreclosure process. For example, examiners focused their reviews on foreclosure procedures and documentation preparation and did not examine whether servicers had followed other requirements, such as FHA requirements for assessing the borrower for a loan modification or other loss mitigation alternatives, before initiating foreclosure…”
So I guess we could have expected that any fixes that followed from this project would be of the illusory kind. We were not disappointed.
The 4.5 million pieces of mail that the 14 banks / mortgage servicers sent out today are part of the “Independent Foreclosure Review.” Homeowners who underwent a foreclosure procedure initiated by one of the 14 can fill out a Request for Review. If the request passes the eligibility requirements then it will be reviewed by an independent consultant. Both the servicer and the homeowner may be asked to provide supporting documentation / clarification. After some time
“[t]he Independent Foreclosure Review will determine whether financial injury has occurred as a result of errors, misrepresentations or other deficiencies in the foreclosure process. You will receive a letter with the findings of the review and information about possible compensation or other remedy.”
It all sounds pretty good until you realize the following: although they will be approved by the OCC, the “independent” consultants are actually chosen and hired by the banks. Nice touch, don’t you think? Here’s my vote for the most fitting response to this junk mail.