OCC And Robosigner Settlements
If there's one thing industry insiders knew and everybody else has seen from the OCC and robosigner settlements, it’s that, at best, regulators underestimated the complexity and man power associated with these problems (at worst they knew what banks and servicers were doing all along, only to later leverage these institutions as scapegoats). Case in point, regulators estimated they would need only a handful of hours to review files believed to contain errors. After months and almost $2 billion, they realized the reviews required five times the time and cost estimated. This begs the question - law firms initially handling these foreclosures circa 2009 were paid around $1000 per file, a rate established by none other than our government - how did the government expect this legal work to be completed for that price…in a fraction of the time it later took to merely review the work…without taking shortcuts and making mistakes? And let’s not forget that regulators were frequently in these accused robosigner foreclosure mills doing routine quality control on the basis they established and deemed to be appropriate. How on earth did regulators miss these errors they’re now saying are so egregious and industry wide? Who is being held accountable for that oversight?
Even now we’re seeing loopholes in these settlements that leave room for banks and servicers to push short sales and second home modifications allowing them to get the credit they need under the settlement, but at the end of the day not doing much for the homeowners these settlements allegedly benefit. And credit towards the big $26 billion and $9 billion said to have been extracted from these settlements for the benefit of homeowners is, in truth, misleading. For example, if a mere $20,000 concession benefiting a homeowner is given on a $200,000 mortgage, credit for the full $20,000 may be given to the bank-servicer. More evidence that the folks who are supposed to protect us either don't know what they're doing or are giving the financial industry an under the table hall pass. In fact, we have to wonder, did government intervention in these cases actually do more harm than good? No doubt it dragged out the foreclosures crises – many of the foreclosures moving forward now would have been resolved several years ago but for this intervention. No doubt, after moving deadlines, failed independent audits, billions paid to consultants, and – now – billions in bounced checks, it’s left many more homeowners feeling all the more discouraged, distrustful and disenfranchised.
I can say from personal experience calling banks and servicers to help homeowners pro bono that, while the voice mail run around of a few years back is gone, for the most part it’s still incredibly time consuming and frustrating trying to work out a foreclosure alternative. The best way to get anyone’s attention now seems to be by simply threatening to file another complaint with the Consumer Financial Protection Bureau. On the flip side, as a lawyer who represents banks for a living, I can say first hand that the regulatory environment today compared to a few years back is insurmountable. Business has become about regulatory compliance, not customers…not exactly what we all hoped for. Life is not perfect. But in this particular our own government is beginning to make the banks and servicers look more competent than they’ve been accused to have been.