STOCK MARKET WATCH -- Friday, 30 March 2012

[Demeter]

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

http://www.nakedcapitalism.com/2012/03/not-so-dumb-consumers-shun-occs-bogus-foreclosure-reviews.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

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 order 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.”

and

“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.