Foreclosure Settlement Shuts Down Reviews: Banks Will Continue Business As Usual
I wrote last week in Forbes about the settlement of the OCC/Fed consent orders that mandated foreclosure reviews by “independent” consultants for fourteen mortgage servicers.
Ten mortgage servicers have agreed to pay more than $8.5 billion in cash and other assistance to help borrowers now rather than pay billions later based on the results of the foreclosure review process. The April 2011 OCC/Fed consent orders sanctioned the servicers for foreclosure abuses for the period 2009-2010 and mandated the detailed reviews. Not one check was ever cut for the harmed borrowers, but the banks have reportedly paid out more than $1.5 billion dollars to the “independent” consultants hired and paid by the banks, rather than directly by the regulators, to perform the detailed reviews.
That column was about 1500 words in total, many more than Forbes prefers I use online but many less than needed to tell all I know about this settlement.
No other report looked into how the borrowers who were either in foreclosure or were foreclosed on by these banks in 2009 and 2010 – that was the limited scope of this regulatory action – were going to be paid now.
My sources are close to the “independent” consulting engagements performed by the largest recipients of the foreclosure review largess, PwC and Promontory.
The combined OCC/Fed press release says, “A payment agent will be appointed to administer payments to borrowers on behalf of the servicers.” The settlement announcement cut off the review process before consultants submitted final estimates of how much each bank owed to harmed borrowers. The calculations of harm were never formally submitted to the regulators for approval. So, it’s not obvious how each bank’s payment agents will be able to make accurate and complete payments to borrowers for foreclosure abuses like fee and penalty overcharges…
Sources close to the foreclosure review engagements tell me that the new payment process will be very simple and is being designed by the OCC/Fed with no input from the consultants anymore. (It’s as if the consulting firms couldn’t wash their hand of this mess fast enough, either.) A previously published OCC/Fed harm matrix includes recommended dollar amounts to be paid to all damaged borrowers by harm category and that, you would think, would be a good place for a new process to start. Sources tell me that the matrix, however, is being tweaked as we speak so it will be as easy as possible for each bank to determine how much each borrower will get. The mortgage servicers will decide which of the foreclosure abuse categories each borrower’s case falls into based on these revised guidelines. Some borrowers could potentially deserve compensation for more than one harm category. No questions will be asked, no further analysis will be done, no audits will be performed, and there is no assurance of consistency in payments by the various servicers for the same harm.
Several people affected by this settlement have called and emailed me to ask about this payment process and, in particular, about the non-monetary remediation or fixes that were supposed to be included in this process based on a detailed review of the files. (All the news and emphasis for the settlement seems to be on the monetary compensation part; we’re not calling it fines and penalties. Gretchen Morgensen of the New York Times today explained the tax advantages of structuring the settlement as some kind of altruistic act by the banks rather than civil or criminal penalties for illegal and fraudulent acts.)
For example, many banks under the OCC/Fed consent orders violated the Servicemembers Civil Relief Act, which prohibits foreclosure on a service member’s home while he/she is on active duty. Some of the banks settled those violations separately.
(One foreclosure review consultant at a Big Four audit firm told me the engagement partner on its “independent” review engagement told the team that military service members were the only “deserving” borrowers in this process. The rest of the files represent “losers” and his firm would do everything to help the bank “mitigate the harm to its bottom line”. How’s that for independent?)
The remedies for a service member in the process of foreclosure “at the time of remediation” is non-monetary. The foreclosure will stop. And if the house was already foreclosed on when the “remediation” started, additional non-monetary remedies like correcting the mortgage servicer record for any improper fee and penalty amounts and correcting credit reports are also mandated.
The harm categories on the published OCC/Fed matrix also proscribed non-financial remedies in all cases. Correcting a credit report is one of the mandated remedies banks were supposed to be on the hook for and it’s not clear if anyone will be making sure banks do this at all, let alone well or consistently. Credit report correction, a non-financial remedy, is the remedy everyone is asking me about. Everyone knows that a bad or incorrect credit report can haunt you forever and if fraudulent or illegal actions by the banks caused a bad credit report the bank should be responsible for wiping the slate clean for injured borrowers.
Here are the kinds of things the OCC/Fed said the banks did to borrowers that were supposed to be quantified and fixed by the OCC/Fed reviews:
- Foreclosing on a borrower in error who was not in default
- Servicer foreclosed on borrower prior to expiration of written trial‐period plan while borrower was performing all requirements of the written trial‐period plan
- Failed to convert a borrower to permanent modification after successful completion of written trial‐period plan
- Servicer completed foreclosure on borrower before documented forbearance period expired while borrower was meeting all requirements of documented forbearance
- Servicer denied borrower application for loan modification that should have been approved, or servicer failed to decision complete loan modification application for which borrower would have qualified
- Servicer never followed up to obtain complete loan modification documents as required under HAMP or other program designated by regulator
- Servicer never solicited borrower loan modification option as required under HAMP or other program designated by regulator.
- Failed to approve modification in prescribed timeframe
- Servicer approved borrower for loan modification under HAMP or other program designated by regulator, but did not make decision within required timeframe
- Servicer error resulted in loan modification with higher interest rate than borrower should have been charged under HAMP or other loan modification program designated by regulator
- Servicer initiated foreclosure or foreclosed on borrower who was protected by federal bankruptcy law
- Servicer initiated foreclosure or foreclosed on borrower, but lacked standing to foreclose
- Servicer initiated foreclosure or foreclosed on borrower and either failed to provide any notice or legally sufficient notice as required under state law
- Servicer error occurred that did not directly cause foreclosure, but did directly result in financial injury to borrower
It’s easy to forget, with all the propaganda being published by major media, why these Fed/OCC consent decrees were issued in the first place. Damage control PR on the banks’ behalf is already in full force, especially at the The Wall Street Journal, emphasizing that not much harm was found and that, “those enforcement actions followed the “robo-signing” scandal. This was the episode in which politicians and the press pretended that minor paperwork errors in the process of foreclosing on borrowers who hadn’t paid their bills constituted major crimes.”
The Interagency Review of Foreclosure Policies and Practices published in April of 2011 that backed up the original FED/OCC consent orders documents the pattern of potential illegal and fraudulent behavior that has now been proven in many, many court cases since. The fact that a borrower may be in default does not negate the overwhelming evidence that court cases have provided that banks proceeded fraudulently and illegally in some foreclosures and looted those borrowers and institutional investors in mortgage securities by charging fraudulent and illegal fees in the process.
The interagency reviews identified significant weaknesses in several areas.
Foreclosure process governance.
Foreclosure governance processes of the servicers were under developed and insufficient to manage and control operational, compliance, legal, and reputational risk associated with an increasing volume of fore closures.
- Inadequate policies, procedures, and independent control infrastructure covering all aspects of the foreclosure process;
- Inadequate monitoring and controls to oversee foreclosure activities conducted on behalf of servicers by external law firms or other third- party vendors;
- Lack of sufficient audit trails to show how information set out in the affidavits (amount of indebtedness, fees, penalties, etc.) was linked to the servicers’ internal records at the time the affidavits were executed;
- Inadequate quality control and audit reviews to ensure compliance with legal requirements, policies and procedures, as well as the maintenance of sound operating environments; and
- Inadequate identification of financial, reputational, and legal risks, and absence of internal communication about those risks among boards of directors and senior management.
Organizational structure and availability of staffing.
Examiners found inadequate organization and staffing of foreclosure units to address the increased volumes of foreclosures.
Affidavit and notarization practices.
Individuals who signed foreclosure affidavits often did not personally check the documents for accuracy or pos sess the level of knowledge of the information that they attested to in those affidavits. In addition, some foreclosure documents indicated they were executed under oath, when no oath was administered. Examiners also found that the majority of the servicers had improper notary practices which failed to conform to state legal requirements. These determinations were based primarily on ser vicers’ self-assessments of their foreclosure processes and examiners’ interviews of servicer staff involved in the preparation of foreclosure documents.
Examiners found some— but not widespread—errors between actual fees charged and what the servicers’ internal records indicated, with servicers undercharging fees as frequently as overcharging them. The dollar amount of overcharged fees as compared with the ser vicers’ internal records was generally small.
Third-party vendor management.
Examiners generally found adequate evidence of physical control and possession of original notes and mortgages. Examiners also found, with limited exceptions, that notes appeared to be properly endorsed and mortgages and deeds of trust appeared properly assigned. The review did find that, in some cases, the third-party law firms hired by the servicers were nonetheless filing mortgage foreclosure com plaints or lost-note affidavits even though proper documentation existed.
Quality control (QC) and audit.
Examiners found weaknesses in quality control and internal auditing procedures at all servicers included in the review.
One example of a court case that tells the truth of what’s the banks have been intentionally doing to book profits is the Magner bankruptcy case in Louisiana. The judge found one bank, Wells Fargo, is systemically – meaning they set their systems to do it – overcharging and fraudulently fining borrowers to squeeze the lifeblood out of them before disposing of them in foreclosures. The judge suspects Wells Fargo is still doing it because the bank refuses to correct its systems. The foreclosure reviews will never document this harm in full – Promontory was the “independent” consultant for Wells Fargo – and no one will be checking now up to make sure this behavior has stopped.
Ben Hallman wrote about the Magner case in the Huffington Post in April of last year:
“Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed,” Magner writes. “But perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods.”The opinion reflects Magner’s disgust with tactics that Wells Fargo used to fight the case — and perhaps frustration with an appeals court ruling in a separate, but similar case, that overturned her order that would have forced Wells Fargo to audit and provide a full accounting for more than 400 home loans in her jurisdiction…And yet, Magner writes, it is only through litigation that the abuses can be uncovered. Calling Wells Fargo’s conduct “clandestine,” Magner wrote that the bank refused to communicate with Jones even as it was misdirecting payments for improper purposes.“Only through litigation was this practice discovered,” Magner writes. “Wells Fargo admitted to the same practices for all other loans in bankruptcy or default. As a result, it is unlikely that most debtors will be able to discern problems with their accounts without extensive discovery.”Magner wrote that the bank still refuses to come clean with homeowners about mistakes it made in the accounting of home loans. This is particularly troublesome in her district, where more than 80 percent of the borrowers who file for bankruptcy have incomes of less than $40,000, and consequently are often unable to hire the kind of legal firepower necessary to counter Wells Fargo’s army of lawyers.“[W]hen exposed, [Wells Fargo] revealed its true corporate character by denying any obligation to correct its past transgressions and mounting a legal assault ensure it never had to,” Magner wrote.
Hi Francine, Why doen’t anyone seem to really want to solve the problem? The only way to resolve this is to sit down with the borrower, review their financial situation, ask them if want to stay in the property or not, and then offer them possible alternatives. Any settlement should take into consideration, in correct actions by the banks, but it should be part of a resolution of each case. We all want to close this chapter and move forward, but this is no resolution, only a further delay that will invite more law suits. The thing that makes the least sense is that the investor in these loans ios either advancing or losing interest and escrow advances each month. Why aren’t they pushing for a resolution? I would love your thoughts on this.
Sincerely, Mike Wallace
It’s frustrating to me too. I think institutional investors are getting their act together and you will see some big lawsuits soon as a result.
All this fuss over servicers robo scam is misdirection. The real scam is why did banks need phony foreclosure documents to begin with? Borrowers duped into putting up the only assets involved in a securities scam I.e. their house the banks over valued, and their signature. Banks raked 30% brokerages fees off of these bundled pools of Notes. It was nothing more than an equity stripping ponzi scheme and both borrowers and investors were the dupes. Nothing will happen to change or correct this. It was done purposefully and intentionally and since the banks and their partner governments are the biggest criminal drug , arms dealers and human traffickers on the globe, my guess is the borrowers and investors will continue to be used and manipulated.
Hi. I was foreclosed on by one of these big banks that initially settled in early Jan. I was notified by the government that I qualified for the independent foreclosure review. I filed a review.
I was one who did everything per the HAMP modification guidelines including submitting all paperwork and making all trial payments on time. At the end of the trial payment period (i have copies of all checks and signed delivery notices to prove they were submitted timely), the bank was balking when I called in to check when my final modification would be sent. 5 months later, I received a form letter in the mail saying they are denying my modification because I did not make enough money. They knew this when they told me to apply for HAMP and the modification. I filed a request for review in 2012. My fear is this…these big banks would not act honestly/ethically and simply refused to give me a modification back then even though I met all HAMP requirements. How can they possibly be trusted to pay out this money or categorize “us” into the correct category with no one checking up on them. They cheat people out of money and their business practices are fraudulent and/or negligent to say the least. They will categorize people into the lowest possible category or forget to pay them at all. This settlement is not going to help anyone unless the government sends someone in to review basic info and the payment to each of us so the banks cannot cheat AGAIN. Thanks.
I was a homeowner for 10yrs middle class family then lost my job Citi was my mortgage lender they did not modify my loan even with a partical payment they send it back to me then next thing i knew my loan was sold to Selene Fiance i had a mortgage that was way over my income limit especially what my home was worth but it was a roof over mines and my sons head this company even hired The Carnell Group to offer me 500 dollars to move out my home of 10yrs. For almost 2yrs now it has been devasting to me and now I’m waiting to hear from Independent Review for some HOPE! My home is still empty and as of today I’m STILL HOMELESS. I do hope for all of us there is a windfall of Hope for us foreclosure families
the wronged america homeowner will continue to be screwed over by the banks. letting them hire friendly reviewers was the first mistake, and they have already been paid 2 billion. that’s 2 billion less for wronged homeowners. i lost everything because wells fargo hemmed and hawed for two years over my modificatin, two years!! in the end i was denied, lost my house, credit, everything. i expect to get zero from this settlement while the prick that denied me will continue to screw folks as usual and live a nice life. they have no conscience. they are parasites. i wish them all the bad things that can happen to a person on this earth.
I was rippped off after a long modify battle with wells fargo 2 yrs 9 months… I was taken for ride and got a then then 1 percent modifcation after waiting that long… now two years later my payment is back up to where is was before … and i went bankrupt in which they pushed me into…My loan is 7 yrs longer and every 6 months I have had a escrow shortage… never missed a payment…was given three trail periods during the long process, leaving me with a large shortage at the end… to much to tell… oh yeah i was denied a review too… said my home was never in foreclosure but I got letters that said otherwise… If I had the extra money , i would get a lawyer and me and my 50% disabled gulf war vet husband would would sue the hell out of them because there is so much wrong with all they have done with us… i have no faith is the big banks (wells fargo) got to believe what goes around comes around… until that day i will continue to pay my higher mortgage balance and keep a roof over our heads… i can relate to all of people that suffered…
if your lawyer and want to make some money and take this all the way, please contact me!! i have no money to pay you up front!!!!!
My husband and I foreclosed on the house we put $50K down payment for through BofA. We initially went to Making Home Affordable Hud counselor and she helped us applied to MHAP after running our finances she told us that we qualify and helped us submit all our documents and letter to BofH. She supposedly working for the HUD working to help the family applied to MHAP. She submitted our documents to BofA so many times and BofA pretended to have lost our documents, then she kept sending over and over even went as far as she called them herself letting them know that she works for the government and according to their guidelines we qualify. After speaking with our local BofA in our neighborhood to help us or even just of file Deed of Lieu, no one can help us. I cannot even count how many 800 numbers we called and kept getting the run around. We spend hours and 1 year working with them submitting our documents for Modification and they pretend they lost our documents. Finally we ended up putting the house up for short sale. When I lost my job and we learn that my husband will be getting laid off from his job due to reduction in workforce. Then they were using the system called Equator and they kept loosing our documents, AGAIN! Our Realtor send an offer for the 3rd time in Equator to the BofA negotiator regarding the offer from the buyer it took them 3 weeks to respond. Our buyer waited for 10 months trying to communicate with no luck with their negotiator they change representatives on us 3 times they finally responded after 10 months of waiting by that time the buyer walked away.
We didn’t have any choice but to foreclose. It took 1 year for us trying to short sale and it took 1 year for them to foreclosed on our house cause our foreclosure got caught in the Robo signing scandal… And the most hilarious joke of all is after they foreclosed on our house 3 months later we received a FedEx in the mail for the application for Making Home Affordable from BofA. Ha! That is so screwed-up! This settlement is like a slap on our face! So if the bank pretends that they never received your documents and keep loosing your request for modifications and you ended up foreclosing due to their incompetence, the people who lost their homes gets nothing and their credit is screwed for 7 years! This is a joke! The pay out plan is insulting they must think we are all stupid! Basically if you follow their games of getting modified which not very many people got qualified, you get more money but if you follow the rules to apply to get modified and they ignore your applications or lose your documents resulting to foreclosure, you are screwed! They are just bunch of criminals! Oh! by the way I used to work for Chase Bank as “Lost in Mitigation” Auditor. I saw that the people they qualified for modifications most were investors who owns multiple houses. Therefore shows that they were more in distress in finances but in actuality these are the people that got greedy and flip houses within 6 months after buying. They denied the hard working single family who only had one house and no other property. I cant say for the rest across Chase divisions but that was just my observations.
Many people who received checks yesterday are reporting that the banks say the paying account has insufficient funds. Here is one forum where people are reporting this:
That would be funny if it weren’t so tragic.
I am one who is suppose to recieve some type of payment from the Foreclosure Review Audit. However, it actually feels hard to accept this payment on many level’s. The fact is everyone’s case has individual circumstances that brought their property into foreclosure besides the similiaritiies of the bank’s fraudulant and decentful acts/behaviors we all experienced on repeated occasions. How can the auditor’s/OCC/Fed decide who get’s paid what dollar amount fairly without reviewing every single client/loan/situation….once again, it does not compute towards a consumer’s rights and best interests. I need the money so more than likely I will use it but then again, when the payment is in my hands it might go towards funding an attorney or possibly i just may return it back to the sender with a nice letter of my opnion and feelings included…hmmmm what to think about this and who is still truly benefiting.
Wells Fargo incorrectly updated their record of our income as double what it really was and gave us a ‘loan mod’ for $1,000.00 more a month than it was. Subsequently, they assured me our income had been corrected. After 14 months of sending all the documents and making all the payments we were finally told the history of incorrect updates and misplacements and that “the person who held the note” would not do a loan modification. We were told we had 3 to 4 months before any action would be taken to try to work something out. The very next day, we received a letter from their attorney stating they needed a bunch of money including fines and attorneys fees or the property would be foreclosed and the same day we received a notice from the county assessors office notifying us of the foreclosure date. The reason, failure to comply with the loan mod they approved based on incorrect income. In November of 2011 I sent detailed documentation of everything that happened to Independent Auditors however based on incorrect bank records we were sent $500.00, which is consistent with that settlement category. The bank sold the house for $80,000.00 less than our loan, which would have been doable had they offered the same to us. The original effort to provide help to homeowners did not provide oversight and failed to consider greed. The subsequent effort to hold the banks accountable, did not provide oversight and failed to consider greed. I wish so much we could do what our government will not and truly hold these banks accountable. But there was a reason we were asking for a loan mod – we don’t have the money to fight and quite possibly we don’t have the energy to fight anymore. Any class action attorneys out there? I have good documentation and I’d gladly surrender any of my settlement to right this horrible wrong.
After going through a time where I was unable to work because of some back problems. I feel behind on my mortgage as well as some other bills. My wife and sent in all the necessary documents for a remodication with Ocwen and was guareenteed a program was available for us. Well, months went by we emailed, faxed and called and was continuously told that we were not going to lose our home. The talks shut down we were told that our file wasn’t open to contact another service department of Ocwen only to find out that they foreclosed on our home and we were evicted. Is there anything my wife and I can do at this point? thank you for any help.
Sincerly yours, Earnest and Sharon Holland