Amidst evidence both old and new of big banks’ wrongdoing, OCC again drops the ball by settling instead of regulating the culprits.
Any follower of this blog or the mortgage crisis at large will — sadly — not be surprised by the seemingly never-ending news of foreclosure misdeeds by the nation’s biggest banks. Recent news reveals a particularly distasteful episode in the robo-signing foreclosure debacle involving victims who are among those who sacrifice the most for our nation and at the same time are among those most vulnerable to wrongful foreclosure tactics: our nation’s active-duty military.
While it has long been known that those affected by the robo-signing foreclosure issues included military families, that number has long been believed to have been relatively small. As the NYTimes’ DealBook reports, at least 700 military members are victims of wrongful foreclosures, in many cases while away from their homes and families on active duty. Not surprisingly given their ‘too big to fail” thought process, the banks’ defenses in this instance include the fact that those 700 or more foreclosures are just a small fraction of foreclosures under post robo-signing review.
Against this background, including the widespread criticism of the February 2012 “Robosigning Mortgage Settlement” among the big banks, States’ Attorneys General, and the U.S. Attorney General, the Office of the Comptroller of the Currency (“OCC”), recently announced a multi-billion dollar settlement with some of those very same banks. Under this latest settlement, the big banks have agreed to make available some $9.3 billion in payments and other relief to victims of the robo-signing foreclosure scandal.
This settlement arose out of investigations conducted by the OCC in late 2010 of multiple banks’ foreclosure practices. By early 2011, those investigations had resulted in OCC enforcement actions and consent orders between the OCC and the big banks providing for a review of the loans by allegedly independent third parties that came to be known as the Independent Foreclosure Review or Independent Loan Review.
A deeply flawed review process
As many have reported at length, this supposed Independent Loan Review was deeply flawed, rife with irreparable conflicts of interest - not surprising considering that the third parties performing the review were hired, paid, and supervised by the same banks whose misdeeds they were supposed to uncover. Nearly two years and $1.5 billion in loan review expenses later, all the review produced were results that were unreliable at best and at worst a mockery of the victims it was supposed to help.
But rather than the OCC doing what we would think a government regulatory agency is supposed to do - namely regulate by investigating, analyzing, and publicly reporting on the shortfalls of the Independent Loan Review and making all possible efforts to reform it – the OCC, seems to have taken the easy way out by nevertheless settling with the alleged wrongdoers.
It also seems to us that if, and to the extent, that the OCC entered into this settlement without having reliable data to reasonably determine the damages that may have occurred, it represents a failure by the OCC of such staggering proportion that it smacks of abject incompetency at best and at worst a complete abrogation of the OCC’s duty to the American public (i.e., to regulate the banks).
To add insult to injury, the OCC has stated that the settlement was entered into in with the goal of getting more money much faster into the hands of those damaged by the banks’ illegal foreclosure practices. But one might wonder whether the OCC honestly believes that to be true. No date for payments to victims has been set by the settlement.
And, it is the banks and other servicers that will determine the respective amounts to be paid to the borrowers (subject to review by the OCC). But without sufficient data, it is inconceivable as to how the OCC will be able to determine what payout amount each wronged borrower should receive. While the OCC would certainly never admit to this, it seems as though its laudable goal of years past to determine payouts based on the degree of harm is being replaced with nothing more than an arbitrary lottery.
How anyone, most of all the OCC itself, can still take the OCC’s motto (“Ensuring a Safe and Sound Federal Bank System for ALL (emphasis added) Americans”) seriously after this latest apparent debacle is a mystery.