I’m working a double shift this week covering two important conferences in Chicago.
The 27th Annual Futures Industry Association Futures and Options Expo starts Monday night and runs through Wednesday at the Hilton on South Michigan Avenue. I’m really looking forward to the networking sessions, courtesy of my media pass under Forbes.com. I’m also planning to attend everything on Dodd-Frank and the futures and options industry that I can stay awake for.
Also in town this week is the Mortgage Bankers Association Annual Conference. This promises to be very interesting, especially in light of my new assignment as a columnist for American Banker. I’ll be wearing the “Accountable” hat as I walk those halls. First up tomorrow, The Future of Mortgage Servicing, right before lunch.
Count on that session to be the anti-apéritif.
My most recent column for American Banker, ““Banks Hire Friendlies for ‘Independent’ Foreclosure Reviews”, received some nice mentions form Yves Smith and her blog Naked Capitalism. Not once but twice she quoted and mentioned it and mentioned it positively. (Not always a guarantee with Yves! But Yves and I are usually simpatico.)
So it should be no surprise to read Francine McKenna telling us that “Banks Hire Friendlies for ‘Independent’ Foreclosure Reviews.” This was a feature, not a bug…
McKenna is right: making the reports public would be a check on whether this effort was serious. And the publication of defects in servicing is not going to threaten the soundness of a bank or lead to bank runs. There is no justification for secrecy, save the reason we understand all too well, that it would expose the fact that this exercise was never intended to be serious.
And again Sunday morning:
If you’ve been following this sorry saga, you may recall that in April of this year, major servicers entered into servicing consent orders with the OCC and Fed. They were clearly all for show. Rather than observer the normal procedure, and have a regulator conduct the exams, the consent orders instead provide for the banks to hire soi-disant independent parties to conduct the reviews.As we and more recently Francine McKenna pointed out, there is pretty much no one with a brand name that is worth renting that doesn’t either have a relationship with the big banks or is keen to develop one. Since the reviews won’t be made public, there is every reason to expect that any problems reported will be strictly cosmetic.
As low as our expectations were, the banks have managed to undershoot them on the downside. Levitin reports on an ad via a temp agency (!) for the sort of foot soldiers who will be performing the audits. Note that this means, contra McKenna, that the actual work won’t be done by experienced professional staff of major firms…
Professor Levitin has exposed the dirty little secret of the advisory side of the Big 4 and other consulting firms that agree to do these kinds of routine, clerical, mind-numbing, file review assignments. No firm has enough cheap local staff anywhere, even in New York, to get so may reviews of so many files done on time and on budget. Some firms, like the law firms and the Big 4, now have temp firms on call to do this kind of scut work. They also tap their offshore teams in India and other low wage countries that can go through a scanned file – assuming the records exist -much cheaper than any U.S. citizen ever would.
What doesn’t happen, as I know and Yves Smith and Professor Levitin know, is the global firms don’t bring in their own staff from all over the country, all over the world, using the power and strength of their brand and global network, at their expense, to serve their clients with a consistent level of top notch and premium billed resources.
That would be too expensive – or rather it would cut into margins – and also force the partners who won the work to share the spoils with their colleagues. Better to subcontract or use an offshore firm to keep everyone aware of who is boss and who owns the client.
What I wonder is if the OCC, Fed, and OTS were as careful about insisting on independence from the client for subcontractors as they supposedly were for the firms awarded the contracts as the lead.
I’m crossing my fingers twice.