Federal Regulators to Bring Enforcement Actions Against Banks… May Get Rid of Hot Towels in Washroom

After lawyers deposing bank personnel uncovered “robo-signers” fraudulently signing thousands of lost note affidavits and other documents the serivcers were required to have in order to foreclose on a home,  but apparently didn’t, a regulatory review of mortgage servicer practices was initiated by the federal banking agencies.

Well, the magazine, American Banker (“AB”) is now reporting that formal enforcement actions against most, if not all, of the 14 mortgage servicers reviewed are expected soon.

AB says that Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and Ally Financial Inc. — are likely to face the toughest requirements, due to the sheer number of issues being addressed.  Expectations are that the enforcement actions will include civil monetary penalties.

The regulators are still in discussions over the specific terms and state attorneys general, the Justice Department, the Department of Housing and Urban Development, the Treasury Department and the Consumer Financial Protection Bureau are all involved.  According to prepared testimony of Acting Comptroller of the Currency John Walsh, which was obtained by American Banker and scheduled for Thursday in front of the Senate Banking Committee:

“The OCC and the other federal banking agencies with relevant jurisdiction are in the process of finalizing actions that will incorporate appropriate remedial requirements and sanctions with respect to the servicers within their respective jurisdictions.  We expect that our actions will comprehensively address servicers’ identified deficiencies and will hold servicers to standards that require effective and proactive risk management of servicing operations, and appropriate remediation for customers who have been financially harmed by defects in servicers’ standards and procedures. We also intend to leverage our findings and lessons learned in this examination of enforcement process to contribute to the development of national servicing standards.”

The federal regulators have said that they hope the enforcement orders have the effect of sending a message to the rest of the servicing industry.  I love it when federal banking regulators “hope” stuff will happen.

The details are still being finalized, but are likely to require servicers to increase staffing levels, establish a single point of contact for borrowers, and “conduct a comprehensive look back at their servicing portfolio to detect and correct problems,” whatever the hell that means.

AB says that the FDIC and other government officials are pushing for “servicers to offer enhanced, streamlined modifications to troubled borrowers in exchange for a clearer path to foreclosure if re-default occurs after the workout.”

But the AB story says: “It remains unclear, however, if regulators will take such a step.”

Okay, just wait a damn minute here.

When I started writing this article I thought I was going to be telling people that finally… finally… after being allowed to abuse literally millions of American homeowners in the worst ways and at the worst time imaginable, finally the federal banking regulators were going take steps to punish servicers for their crimes against homeowners, investors, and our society as a whole.

But, that’s not what’s happening here at all is it.  What did that last paragraph say?

“… servicers to offer enhanced, streamlined modifications to troubled borrowers in exchange for a clearer path to foreclosure if re-default occurs after the workout.”

You know what… go to hell.  How about the servicers offer “enhanced, streamlined modifications to troubled borrowers” just because it’s the right thing to do?  How about the servicers do it because although they can never come close to making amends for what they’ve done, under your watchful eye, federal regulators, I might add… they start doing the right thing now because they owe it to the American citizenry?  How about they do it because it’s their job… because it’s in the best interests of the nation… how about any of those reasons, you disingenuous pack of regulating clowns?

How about the servicers… and you guys that call yourselves banking regulators, although I would like to point out that clearly you have regulated nothing in the banking industry for perhaps 30 and certainly 20 years… how about if you all start to realize that it’s your bankers that have caused our economy to fall off a cliff and caused the pain that will no doubt be with us for decade or decades, and that if people re-default it’s your fault for not properly modifying the loan, or because of yet another economically induced hardship, and that you don’t get to foreclose quicker next time because you did such a lousy job the first time around?

How about if the servicers are never permitted to punish anyone else for anything because they lost that privilege when they proved themselves capable of being nothing short of sadistic, unfeeling monsters, unfit to socialize with the rest of humanity?  How about something like that?

And the story goes on to say that although several banks were expecting the enforcement actions to come out this week, but that “the timeline appears to be slipping.”

Yeah, I’ll be the timeline is slipping.  Something in Washington’s slipping, that’s for damn sure.

Now, sources are apparently saying that they hope to issue whatever milquetoast enforcement action orders the traveling sycophants finally agree on sometime in March, and that there’s going to be something called a “global settlement” that comes as part of the package.

“After the orders are released, regulators will follow up with a report on the findings of their review and further recommendations,” the AB story says.

Oh and guess what?  “There appear to be differences among the agencies in how tough to make the enforcement orders and how high the monetary penalty should be.”

No kidding?  Now that’s hard to believe, don’t you think?  Reports say that Elizabeth Warren’s Consumer Financial Protection Bureau, or CFPB, is “pushing for steep fines to be assessed on servicers, coupled with stringent remedial actions.”  Go Liz… you are the bomb.

The FDIC is also supposed to be in favor of tough enforcement measures.  (Like what, do you suppose… a stern talking to?)  The OCC… or, Office of the Comptroller of the Currency, however, is “concerned about taking overly harsh actions.”

Let me guess, the OCC wants to get tough on servicers that have violated whatever it is they’ve violated by offering back rubs, blow jobs and a buck ninety-five as a fine.  I can’t take this much longer… why the hell did I start writing about this in the first place?

It seems that this past Monday, the regulators… and I use that term extremely loosely… met with Tim “Transparency” Geithner, along with representatives from the Federal Housing Finance Agency (“FHFA”), HUD and CFPB in order to consider the pending actions.

The AB story then says the following:

“Although the orders will effectively establish standards for the largest servicers, they are not expected to supplant efforts already underway for regulators to issue their own formal set of rules.”

What in the world does that mean?  Why can’t these people talk like… I don’t know… people?  I’ll tell you what… I wasn’t in favor of it before, but I’m starting to be pro-torture over here.  Let’s waterboard these inconceivable wastes-of-space and then see how bright eyed and bushy tailed they are at work the next day.

Want more?  Try this sentence on for size:

“Regulators are still divided on where and how to set such standards, with the FDIC pushing to include them as part of a risk-retention rule while the OCC wants to craft a stand-alone measure.”

Gee, which side of that pressing issue are you on, pray tell?  Are you a risk-retention kind of person, or do you favor a stand-alone measure?  Don’t answer that, damn it, I’ll have to hurt you.

There’s more and then I’m done with this topic forever… you want to read about crap like this, read someone else’s blog because I’d rather chop off all eight of my fingers than have to write about this kind of drool again.  Here goes…

“Regulators have been hinting for weeks that they may take enforcement actions against servicers, and Walsh sought to reassure Congress everyone’s on top of the issue.”

“We are directing banks to take corrective action where we find errors or deficiencies, and we have an array of informal and formal enforcement actions and penalties that we will impose if warranted These range from informal memoranda of understanding to civil money penalties, removals from banking, and criminal referrals.”

Sheila Bair over at FDIC says that any solution “must result in industry-wide standards.”  In her January 19th speech to the Mortgage Bankers Association. Bair said:

“In order to remedy failures endemic to the largest mortgage servicers, I hope to see enforceable requirements that will significantly improve opportunities for homeowners to avoid foreclosure.”

Wait a minute… what damn year is this?  2011?  Yeah, fine… I was just checking.  I’ll bet you anything that if I go back two years, I can find Sheila saying that same sentence.

Then the AB story says that it would have been better if the servicers had taken remedial steps on their own before regulators were forced to take action.  Oh for crying out loud… yeah, I suppose it would have been better for Pablo Escobar to check himself into a drug rehabilitation center too, but that wasn’t very likely, now was it?

Then from the AB story:

“It’s unfortunate it had to get this point,” said William Longbrake, an executive-in-residence at the University of Maryland. “It would have been better if the industry had done these things without the federal government.”

What in the Sam Hill is an “executive in residence”?  And what kind of distorted perspective looks at what the servicers have done her… these last three years… and says… gee, it would have been better if they wouldn’t have done those things.  Mr. Longbrake, are you aware that people have committed suicide because of that these servicers have done to them?  Marriages have ended.  Entire communities destroyed.  Damage to children that is inestimable.  How about asking… where the hell has the federal government been for the last three years?

The AB story wraps up with talk about the “global settlement” claptrap, and I don’t know what the hell it means, but I sure don’t like the sound of it.  Here’s what the AB story says:

“While the settlement is likely to be bad public relations for the servicers involved, Jaret Seiberg, a policy analyst at MF Global Inc.’s Washington Research Group, said a global settlement may still be positive news for the industry.”

“A global settlement should be extremely positive for banks by putting this issue to rest and letting the industry move past the paperwork snafus,” Seiberg said.

“Bad public relations?”  “Paperwork snafus?”  Jaret, Jaret, Jaret… my boy… you are such an asshat.  And you’re a policy analyst at MF Global Inc.’s Washington Research Group?  If there’s a God, someday you or someone you love will lose your home to foreclosure.

Jaret was also quite intrigued by “the potential for streamlined modifications.”  It’s true… Jaret says that requiring streamlined modifications could have an impact.  Maybe… he’s not sure, but they could… according to Jaret… it’s a possibility… according to Jaret… they might… have an impact… of some kind… who knows, but it’s a distinct possibility… says Jaret.

Here’s Jaret’s big finishing quote… pay attention, he’s a policy analyst remember… at MF Global Inc.’s Washington Research Group.  Go Jaret… it’s your birthday… Go Jaret…

“The easier you make the modification the more likely you are to get a modification, so the concept makes a lot of sense.  For the industry, where there is an automatic modification and then foreclosure if the borrower goes delinquent a second time, you could end up benefiting the banks because it’s going to eliminate a lot of uncertainty now about the ability of financial firms to foreclose on borrowers behind on payments. Right now there are so many programs out there, it difficult to know when banks can foreclose. This would set up a streamlined model.”

What?  Yeah right… like I’m the only one thinking about how much fun it would be to kick the shite out of Jaret in a parking lot after a couple of beers and maybe a shot of Patron.  Don’t punish yourself… It’s okay to dream.

And I’m going to have to watch this stupid story develop, you want to know why?

Well, believe it or not, a producer from KNX/KFWB, which are CBS Radio stations out here in Los Angeles, just called me a few minutes ago, as I was writing this unbelievably annoying story, and asked me if I would be on Bob McCormick’s Money Radio Show again this coming Monday morning starting at 9:00 AM.

It seems that they just saw this story come across the wire and want me to come on the show and discuss it.  At 9:00 AM Monday morning.  And I’m going to be in Las Vegas at the Paris Hotel and Casino attending Max Gardner’s Operation Strike Back attorney training event, so it’s really quite a problem.

I mean, I can do the show from the phone in my room, but how in the world am I going to have time to get drunk enough by 9:00 AM so that after I talk about this insipid drivel I don’t hurl myself from the top of the Vegas version of the Eifel Tower?

Mandelman out.

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