Doing something — anything — quickly but poorly is no substitute for taking the time to do what needs to be done well.
Congresswoman Maxine Waters (D-CA) is fearful that the quick-and-poor may prevail with mortgage servicer reviews, based on what she sees planned in response to last April’s consent orders from federal regulators.
"The only thing worse than no accountability for the banks," according to Waters, "is for regulators to create the illusion of accountability, while putting no enforcement power behind their efforts."
The accountability Waters is seeking relates to an announcement by the Office of the Comptroller of the Currency and the Federal Reserve Bank last April of formal enforcement actions against 14 national bank mortgage servicers and third-party servicer providers. The regulatory actions relate to findings of for unsafe and unsound practices involving residential mortgage loan servicing and foreclosure processing.
The enforcement actions require the servicers to: promptly correct deficiencies; significantly improve practices, including communications with borrowers and dual-tracking; and to establish robust oversight and controls pertaining to third-party vendors, including outside legal counsel that provides default management or foreclosure services. To meet the requirements, the servicers were required to hire independent outside consultants and legal counsel directly.
Waters' displeasure is particularly notable these days, given her sudden position as next-in-line to take over as ranking Democrat on the House Financial Services Committee in the wake of Rep. Barney Frank's announcement last week that he will not run for reelection. She has been speaking out strongly about lack of transparency and potential conflicts of interest built into the regulators' plans to make mortgage servicers step up and right foreclosure wrongs.
Waters sent a letter On October 28 to the Office of the Comptroller of the Currency and the Federal Reserve, signed by 15 of her House colleagues, calling on regulators to publicly release information regarding the steps that mortgage servicers are taking to investigate potential illegal foreclosure practices and prevent such acts in the future. (My October 6 American Banker column on potential conflicts of interest between servicers and consultants was cited in the letter.)
This was the second letter Waters sent on the matter. The first, delivered in July, was ignored. The Congresswoman's concerns center on three issues:
- How servicers and their consultants identify households with eligible claims and the methods used to reach households harmed by foreclosure-processing problems.
- Concerns that review results will be tainted in favor of servicers due to ties between them and the firms they're hiring to review them.
- Concerns about a lack of expertise about implementing the terms of the 14 consent orders among the staff hired by servicers and/or their foreclosure review consultants.
This time, the OCC responded quickly about the miscreant servicers they regulate. On November 22, 2011, it issued a report on the actions of a dozen national bank and federal savings association mortgage servicers aimed at complying with the consent orders issued in April 2011 to correct deficient and unsafe or unsound foreclosure practices. (The two remaining consent order recipients — GMAC/Ally and SunTrust — have not yet finalized their terms with vendors and as a result their overseers, Fed Chairman Bernanke and the Federal Reserve Bank, have not yet responded to the request for full disclosure, according to the Water’s office.)
"The OCC also released engagement letters that describe how the independent consultants, retained by the servicers, will conduct their file reviews and claims processes to identify borrowers who suffered financial injury as a result of deficiencies identified in the OCC's consent orders. The letters identify the names of the independent consultants conducting the reviews and include language stipulating that consultants would take direction from the OCC throughout the reviews," the OCC report said.
Please explain in detail the following:
1) Your understanding of the concept of "Sanctity of Contract."
2) Your understanding of a borrowers duty to make the payments to a lender for any monies they borrow on a home, car, appliance, etc.
3) Your understanding of MER's and the legal concept of "Standing."
4) Your understanding of the recent Court decisions that support any persons rights to enforce a legal contract for money when one of the parties breach the contract by their failure to pay as agreed.
5) Please describe what you would do if you gave a Note and Deed of Trust to a person who promised to pay you X amount each month as a payment on your Note & Deed of Trust and they stopped paying, lost their job, etc. Would you give them the house for the current market value and be willing to lose the difference? Would you give them your house for free? How would you feel if you were called a thief for attempting to get your property back (foreclose) to protect you and your family financial condition?
What I would do if I were a bank and had a borrower who stopped paying is simple: I would provide the specific documentation required by the court to execute a foreclosure case. I would NOT produce robosigned documents, backdated assignments, improper notices of service, etc., because honest judges tend to look down on plaintiffs who disrespect the legal process. The biggest thing I would NOT do? Illegally foreclose on members of the military fighting for this country because that would me my bank look like a craven financial institution.