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Journalism in the Public Interest

Despite Warnings From States, Federal Regulators Failed to Act on Foreclosure Problems

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Photo by Spencer Platt/Getty Images

While they may be conducting their own investigations, federal prosecutors and national bank regulators for the most part aren’t the ones leading the investigation into the foreclosure mess. At least that's the perception—one that's reinforced when Elizabeth Warren, Obama's head of consumer financial protection, says her money is on a 50-state investigation by the states' attorneys general. The New York Times’ Joe Nocera, for instance, has said that the handful of federal investigations into the subject are “not going to amount to a hill of beans."

Why such low expectations for the feds? A piece in the Washington Post today may shed some light (emphasis added): 

As foreclosures began to mount across the country three years ago, a group of state bank regulators suspected that some borrowers might be losing their homes unnecessarily. So the state officials asked the biggest national banks for details about their foreclosure operations.

When two banks—J.P. Morgan Chase and Wells Fargo—declined to cooperate, the state officials asked the banks' federal regulator for help, according to a letter they sent. But the Office of the Comptroller of the Currency, which oversees national banks, denied the states' request, saying the firms should answer only to inquiries from federal officials. In a response to state officials, John Dugan, comptroller at the time, wrote that his agency was already planning to collect foreclosure information and that any additional monitoring risked "confusing matters."

But even as it closed the door on state oversight, the OCC chose itself not to scrutinize the foreclosure operations of the largest national banks, forgoing any examination of their procedures and paperwork.Instead, the agency relied on the banks' in-house assessments. These provided no hint of the problems to come until they had tripped the nation's housing market, agency officials later acknowledged.

In other words, state bank regulators—unable to get cooperation from the banks—warned federal regulators of problems with the banks’ foreclosure operations, and they were told to let the feds handle it.

Even when problems with robo-signing ignited a scandal in recent months, the Office of the Comptroller of the Currency ordered lenders to conduct their own reviews and only later—about two weeks ago, according to the Post—began its own examination. Here’s how the OCC explained its regulatory inaction:

"We looked at the final stage of the process and thought of it as one that would be governed by standards and procedures in internal controls," said Julie Williams, the OCC's top lawyer. "You would only be able to know for sure if there was a problem with the document-signing process if you were standing in the room watching someone sign documents. That is not traditionally part of the bank examination process."

Today’s story harkens back to a Bloomberg Businessweek report, which is set up almost identically—state officials met with the OCC, warning of an impending problem that they were subsequently told to leave to the feds. The difference was that this meeting occurred even earlier in the decade, when banks first began pushing consumers to take out risky mortgages—mortgages that in all-too-many cases would end in default, foreclosure, and lead into the current foreclosure crisis.

Taken together, the two pieces show how efforts by state regulators and attorneys general to protect consumers—first from the banks’ irresponsible lending and later from suspected mistakes in banks’ foreclosure operations—were “thwarted in many cases by Washington officials hostile to regulation and a financial industry adept at exploiting this ideology.” From Bloomberg Businessweek (emphasis added):

More than five years ago, in April 2003, the attorneys general of two small states traveled to Washington with a stern warning for the nation's top bank regulator. Sitting in the spacious Office of the Comptroller of the Currency, with its panoramic view of the capital, the AGs from North Carolina and Iowa said lenders were pushing increasingly risky mortgages. Their host, John D. Hawke Jr., expressed skepticism.

Roy Cooper of North Carolina and Tom Miller of Iowa headed a committee of state officials concerned about new forms of "predatory" lending. They urged Hawke to give states more latitude to limit exorbitant interest rates and fine-print fees. "People out there are struggling with oppressive loans," Cooper recalls saying.

Hawke, a veteran banking industry lawyer appointed to head the OCC by President Bill Clinton in 1998, wouldn't budge. He said he would reinforce federal policies that hindered states from reining in lenders. The AGs left the tense hour-long meeting realizing that Washington had become a foe in the nascent fight against reckless real estate finance. The OCC "took 50 sheriffs off the job during the time the mortgage lending industry was becoming the Wild West," Cooper says.

Hawke, the former head of the OCC, told Bloomberg Businessweek that blaming the feds is "bull----.” He blamed the risky lending on mortgage brokers and originators, which he said were under state purview. (In 2009, state regulators fought the OCC in court for the power to take enforcement action against national banks for violations of proper lending practices. The U.S. Supreme Court—in a case known as Cuomo v. Clearing House—sided with the states, ruling that they are not prohibited from enforcing state laws against national banks.)

The current OCC continues to defend the agency’s oversight of mortgage operations and told the Post that while the agency stayed hands-off in regard to banks’ foreclosure process, “we put emphasis on the modification process." As our reporting has shown, getting loan modifications—whether through the federal government's modification program or the banks' proprietary programs—hasn't been easy for homeowners either, and the process is also riddled with some of the same dysfunction and disorganization plaguing the foreclosure process.

The agency, as we've noted, has rarely taken formal enforcement action against the banks but has said this is because it works closely with the banks to resolve problems while they're still small.

Inform our investigations: Do you have information or expertise relevant to this story? Help us and journalists around the country by sharing your stories and experiences.

It strikes me as odd, and defeats the purpose, of having an agency such as the OCC that is going to rely on “the banks’ in house assessments”.  The idea of policing such banks through an agency that clearly has no fortitude or conviction to enforce actions against them is a complete farce.
If the OCC can’t do it, I doubt Black and Wray at HuffPo. will have much success in getting BAC, or others, to open their books.  It will require a lot more pressure from many fronts…..or alternatively, another collapse.

The system worked just the way the banks wanted it to.  In essense they would brook no interference in their plans to fleece the consumer and every stake holder except the banks.  The crooks were calling all the shots and still are.  The banking system is rigged and that’s the way the banksters like it.

nissim sasson

Nov. 8, 2010, 3:13 p.m.

The crooks and the police are the same people
The croocks arre policing themselves because we all know the OCC works for the Banksters not for the American People, what a joke
We r doomed!

I filed with the OCC 6 months Ago.
Ont he Occ form it states

” While complaint processing time may vary, on avareage you sshould receive a written response from CAG within 60 days after we have a complete file”

I checked online yesterday.  Case is under review.
OK 6 months is not enough?Then don’t say 60 days.
Say it might take One Year.

We have a very serious problem in this country with these government agencies.

When somebody tries to tell you how great a one-world-government would be because it would “end wars and famine”, remember how a Federal government is OUT OF TOUCH and how a New World Order would be even FURTHER out of touch!

It may be time to bring back the guillotine and locate in on the Mall. Do the Congressional thieves really believe revolution is impossible??

Stevor,

Who in the heck is talking about a one world government?  A New World Order?  You need to turn off Fox and talk radio and re-enter the world of reality.

I don’t believe the kind of people we have in America.

There is more the 10 million mortgages in trouble, if you figure 3 per homes it is 30 million people who about loose their homes including children.

So if we figure, there is still 20 million angry adults who are angry homeowners.
The Irony of this is that 8 bankers can actually overthrow 20 million people,and kick them out of their homes including their children.

Yes :    8 Bankers VS 30,000,000 Homeowners
and the winner is the 8 Banksters.

I thought Americans were fighters. Fighter for freedom and to have a better lives for their kids. We declare war on everything here in America.

War on Poverty,  War on Drugs, War on Terror,

How about we declare WAR ON BANKS.

We go to other countries to fight but in our homeland people are so affraid they don’t have the guts to stand up to 8 evil Bankers? No wonder this Country is no longer what it used to be.
8 Bankers able to hold hostage 30 million people including children.
If you affraid to stend up for yourself than stand up for your family and children.
I am very disapointed America.
and remeber. NO GUTS NO GLORY

I don’t believe the kind of people we have in America.

There is more the 10 million mortgages in trouble, if you figure 3 per homes it is 30 million people who about loose their homes including children.

So if we figure, there is still 20 million angry adults who are angry homeowners.
The Irony of this is that 8 bankers can actually overthrow 20 million people,and kick them out of their homes including their children.

Yes :    8 Bankers VS 30,000,000 Homeowners
and the winner is the 8 Banksters.

I thought Americans were fighters. Fighter for freedom and to have a better lives for their kids. We declare war on everything here in America.

War on Poverty,  War on Drugs, War on Terror,

How about we declare WAR ON BANKS.

We go to other countries to fight but in our homeland people are so affraid they don’t have the guts to stand up to 8 evil Bankers? No wonder this Country is no longer what it used to be.

I am very disapointed America.
Remember NO GUTS NO GLORY

I don’t believe the kind of people we have in America.

There is more the 10 million mortgages in trouble, if you figure 3 per homes it is 30 million people who about loose their homes including children.

So if we figure, there is still 20 million angry adults who are angry homeowners.
The Irony of this is that 8 bankers can actually overthrow 20 million people,and kick them out of their homes including their children.

Yes :    8 Bankers VS 30,000,000 Homeowners
and the winner is the 8 Banksters.

I thought Americans were fighters. Fighter for freedom and to have a better lives for their kids. We declare war on everything here in America.

War on Poverty,  War on Drugs, War on Terror,

How about we declare WAR ON BANKS.

We go to other countries to fight but in our homeland people are so affraid they don’t have the guts to stand up to 8 evil Bankers? No wonder this Country is no longer what it used to be.

I am very disapointed America.

When all the facts make it to America’s mainstream media, and to all Americans, we will ultimately have moved from TBTF (Too Big To Fail) to TBTJ (Too Big To Jail).

The entire financial crisis, including predatory loans, falsely inflated home appraisals, inflated housing prices, securitized mortgages, ignored FBI and AG warnings of mortgage fraud, fired whistle-blowing Wall Street VP’s, false triple-A ratings, CDOs, bank bailouts, record bonus, a HAMP program designed to help banks but advertised as a way to help homeowners, robo-signers, false assignments, incessant lies like those told be Jamie Dimon’s CHASE foreclosure team, Timothy Geithners ongoing efforts to protect the banks at the expense of ALL Americnas, not just those in foreclosure, was,  knowingly orchestrated by the financial institutions, and the Washington arm of Wall Street (our so-called regulators).

There is clear and indisputable evidence of FRAUD on a scale that we have never seen before!

TBTJ :  TOO BIG TO JAIL

And do we think the banksters have anything to worry about with Republican control of the House of Representatives, whence cometh excuses, blather, and cover up.

Why can’t I post?

Corey Mondello

Nov. 8, 2010, 7:41 p.m.

Well…the states want more power, and less control by the government. Here is there chance to prove they can get out of a mess without asking for help.

I just don’t get it - let the banks do their own assessments and NO ACCOUNTABILITY to anyone???  Are you kidding me?  That’s like allowing 4th graders to grade themselves and check their own HW!!  “Hey, Ms. C.,  REALLY did all of my work so I’m giving myself all A’s.” 

WTF????

Let’s try this again - my comment didn’t post the first time.

So, basically, we’re “trusting the banks to check their own work,” right?  Are you kidding me?  That’s like allowing 4th graders to check their own work and grade themselves, but have me sign their report cards.  “Hey, Ms. C., I really did all of my work, passed all of my tests, did such a great job I’m giving myself all A’s!!  ”  Yeah. Ok.  Really???

With our court system in a shambles with more than a few corrupt judges, anyone who expects integrity and honesty anywhere along the way is delusional.

The fact of the matter is that a judge can get away with things you would never dream of and his misdeeds will be covered over by the good ole boy network.

This entire country is collapsing just as all “great” societies do under the weight of our own arrogance and disregard for morality.

Anyone who isn’t frightened by the abuses that happen daily in our “halls of justice” is in for a rude awakening.

The obviously ridiculous events in this case, putting the fox in charge of the henhouse has never worked.  I have to think that it is allowed to continue because our government isn’t, contrary to popular thought, looking out for me or you or anybody who isn’t in some position of power/authority.

It makes me tired because so few people will accept this or see the handwriting on the wall.  With so much corruption we will fall eventually, its just a matter of time.

Nissim Sasson

Nov. 8, 2010, 11:38 p.m.

The real problem here is that the federal government and the OCC they both are in the packets of the Banksters

I read that the banks are the shareholders of the Federal Reserve.

American Patriot

Nov. 9, 2010, 6:51 a.m.

I just copied this article and emailed it to the OCC.

And in big bold l;etters I said.

Your Agency is going to be one of many SUED for FRAUD once the indictments start.

They are FRAUD and should be closed and arrests made.

Once the American people have had enough FRAUD, they will start enforcing their own justice.

Civil unrest is not far away now

From 1981 on the banks and the insurance companies put on a concertted effort through the media to discredit any individual or indisvuals that caused them perceived harm. Trial attorneys, juries, regulators etc., etc, and particulalrly “regulations” to protect individualsall of which were put into place by the 20 year of FDR and Truman. They chipped away at every regulation, every law, every politician that got in their way, the court system, the Supreme Court down. America was so “dummed down” with wedge issues they just let it happen. Last week’s election is exactly the same. People voting against their own best interests.

To American Patriot   The problem is that Timothy Geithner the only person who could reprimend the OCC. and we all know this never happen.

Don’t forget this country is turned into a Dictatorship.

Banks are the dictators telling government what to do.
Like I sad in my earlier post 8 people hold 30million American hostage. We need a hostage negotiator or we need to revolt. When people get mad enough and banks will start burning , because I can see this eventually will happen, then our government will start to listen. But then it will be too late.

Unfortunately I have seen what a Riot can make a city look like, because officals stood back and did nothing. These acts not beneficial to neither. I am sure other people read these posts from the government ” I call them Spies”
so I beag you please start to make changes before anything bad happen and people start to get hurt.

The American homeowners are angry. Angry because when banks threw money at people to buy homes or refinance, bankers never told people the truth.

Example Hey we know you will not be able to pay this loan back so we will bet against you that you wil loose your home so we bankers will make a Sh@ load of money when we sell you the mortgage, plus we make a Sh@ load of money the first moment you will default because we bet against your loan 30 to 1 that you cant pay.
This is just one example. And it is the truth.

Nissim Sasson

Nov. 9, 2010, 11:49 a.m.

Garbor, Maureen, JS, good call, People voted for small government that is exactly what the Banksters wanted, and people bought it what they really want is less regulation or no regulation at all, they were afraid that regulation was coming to them so they came out with this stupid new line about small government and it worked ! The new anti regulation Republicans are now in power, people get confuse more regulation only means more regulation to corporations, Oil energy, Agriculture, Pharmaceutical, Banksters, and Telecommunications, these 6 Industries are extracting the wealth from America at an incredible pace, and most the Banksters and their Fraudclosures, this is not about regulating individual people, but these 6 industries know how to full people in to voting against their own interest
We are domed !

Nissim Sasson

Nov. 9, 2010, 12:06 p.m.

Garbor, Maureen, JS,  good call, People voted for small government that is exactly what the Banksters wanted, and people bought it what they really want is less regulation or no regulation at all, they were afraid that regulation was coming to them so they came out with this stupid new line about small government and it worked ! The new anti regulation Republicans are now in power, people get confuse more regulation only means more regulation to corporations, Oil energy, Agriculture, Pharmaceutical, Banksters, and Telecommunications, these 6 Industries are extracting the wealth from America at an incredible pace, and most the Banksters and their Fraudclosures, this is not about regulating individual people, but these 6 industries know how to full people in to voting against their own interest
We are domed !

Nissim Sasson

Nov. 10, 2010, 1:49 a.m.

on the news…

.msnbc.msn.com/id/31510813/#40095776

Here’s a story to get behind!

Government sponsored refi’s at current rates.  DUH! (Virtually no cost to the taxpayers!) 

http://www.npr.org/templates/story/story.php?storyId=131223118

Of course, we can’t go getting our hopes up for any fair solution to the foreclosure crisis, while the Washington arm of Wall Street has influence over the president.

Still, you gotta have hope!

I wrote to the OCC in January of this year right before my trail modification about my loan with Bank of America.  I wrote because even though I sent two regular payments one in the form of a money order and one in the form of a check neither one had been cashed/and/or credited to my account.  I wanted to know why they were holding up applying these to my account.  I had sent the money order after being on a forbearance which was a period of three months that I made no payments and this was at their insistence after I missed one payment, just one which I had tried to tell them at the time about why and got no response except getting hassled and late charges.  The reason was a bill of about $400 for emergency appliance repair.  When the check wasn’t credited to my account I was concerned they were going to try to pull something saying that I failed to resume my payments after the forbearance.  I finally got hold of someone in the president’s office of BOA and they told me that it was because by the terms of my forbearance I was to make subsequent payments in the form of a money order.  I never saw that but I assume it was somewhere in the multi-page agreement buried in the fine print.  The weather was bad, it was snowing and icy but I made a special trip to the only Federal Express office that was still open so I could make another payment by money order and that wasn’t cashed or credited either and so I wrote to the OCC and all they did was write me back and say basically BOA said they are on top of it.  Which was no answer to me and nothing to quell my unease about whether they were setting me up to look like I wasn’t paying after a forbearance.  I still have to check my account with BOA and be sure that both forms of payment were eventually cashed but why so late.

So basically writing to complain to the OCC just elicited a response equal to “I asked what’s up and they said its being taken care of”.

So, no, the OCC doesn’t do much of anything.  They seemed very proud of the letter they had sent me and said if I had any other concerns to write.  I still had the original concern much less any additional concerns.

In early September I signed a permanent modification about which I had misgivings but financial advisers looked at it and said even taking into account the possibility the figures were wrong about how much I was behind and some mystery add-on payment at the end of my loan that I would save approximately that amount in interest the first year and so I signed it with some reservations.  The number on the permanent modification to call if I had questions was to a BOA office which when I called and asked my first question about the Permanent Modification offer immediately transferred me to another office and then it was just off on another one of the endless call transfer marathons BOA is so good about.  When I expressed hesitance to sign the modification offer without some answers I was told basically that the last time somebody did that he was foreclosed on immediately.

I still have not heard back from BOA after signing it with some concern about my unanswered questions.  I have no signed copy for me so absent that I still don’t know where i stand.  I believe it says somewhere in the modifcation that until I get a signed copy from them its not a done deal.  When I called to make my November payment I had to play the usual call transfer game and the first person who talked to me said she was sorry she couldn’t accept my payment because I was seriously behind in my payments at which point I about lost it.

The OCC has responsibility for failing to take the lead when they had warning signs.  I don’t think there has ever been any serious oversight or questions as to why the modification process is really such a failure for most people.  Despite Obama’s saber rattling speeches about possible sanctions for recalcitrant lenders/servicers no one to my knowledge has ever gotten a sanction and so its all just pomp and circumstance. 

The feds are not doing their jobs anywhere IMO.  The states are me with resistance when they try to pick up the slack the feds are responsible for just like these articles show.  Its the same thing as the Arizona illegal stonewalling.  The states pass regulations to enforce what the feds will not and all they get from the feds is interference.

Heads should roll but the accepted story out there is still the one where folks don’t supply all the info to get the mods and that’s where the problem is which is a lie and an obfuscation of the true reasons more mods aren’t taking place which has little to do with documentation not being supplied and more to do with foot dragging and ineptitude and lack of oversight.

I did want to add that since my forbearance my payments are consistently credited to my account late, sometimes a week or two and I have to wonder if it isn’t to set me up for not paying on time and if I do get the permanent modification I won’t qualify for the credit for keeping up with my payments.  Basically I don’t trust anyone in DC or anyone who reports to DC.

If anyone is consider a class action in California, I’m in!!!!!!!!!!!!!!!!!

If anybody is consider filing a class action in CA, I am very interested.

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