GAO Study Published May 5th Discovers Illegal Foreclosures

On May 5, 2011, the Government Accountability Office (“GAO”) released its study of mortgage servicers and foreclosures… I guess now that everyone and their brother-in-law have conducted such a study into the mortgages servicers’ maladroit, dishonest and criminal best practices, the GAO figured they couldn’t get in any trouble for piling on with more of the same.  Personally, I’m holding out for the U.S. Post Office’s study of mortgage servicer performance, which I hear is going to be followed up by a scathing report being issued by the Bureau of Land Management in conjunction with the Department of Transportation.

And I’m sorry if this sounds at all bitter, but do you think it has it occurred to any of the GS-geniuses inside the beltway that I’ve been writing about the… shall we say, inadequacies of mortgage servicers for two and a half years, and they’re just now getting around to issuing a series of studies at a cost I don’t even want to know about, that say the same things I and others could have told them about over coffee in 2008.  I don’t know about you, but it scares the heck out of me.

Well, anyway… the GAO’s study showed the same things that all the other studies have shown, causing several legislators including Sen. Al Franken, who presumably were not able to jump onto the last study’s release, to write a letter to several of the banking regulators (and I use that term very loosely) and Federal Reserve Chairman, Ben If-You-Don’t-Have-It-Print-It Bernanke. According to a story by Jim Spencer, writing for the Twin Cities’ Star Tribune, the letter said:

“We have seen countless examples of servicers giving borrowers the run-around and continuing the foreclosure process when a loan modification has already been obtained.  Perhaps the most egregious cases of servicer wrongdoing have been violations of the Service Members Civil Relief Act by wrongly foreclosing on active-duty service members.  Correcting these problems and ensuring they do not reoccur should be a priority for all of your agencies.”

Before I say anything about their statement above, let me make it clear that I served in the U.S. Air Force following graduation from high school, so I’m perfectly capable of being biased about our troops, and hyper-sensitive about them being inadequately treated by our government, which they are in so many ways.  However, that being said… I’m not sure I can distinguish between someone on active duty losing their house as a result of an illegal foreclosure and… oh, I don’t know… anyone else.

I wrote about a family in which the father was diagnosed a few years ago with advanced diabetes.  His kidneys have failed, he’s on dialysis, has developed heart disease, was on a respirator the last time he was hospitalized.  He worked for the City of Placentia in Southern California for some 27 years.  His wife has her own small business.  They have an adorable eight year-old daughter who goes to school near by and loves her home.

Medical bills combined with the economy sliding off a cliff caused them to ask JPMorgan Chase to modify their loan, and they made their payments every month on time until the day that they got a notice on their door saying their home would be sold out from under them… in an hour, they learned after calling Chase in a panic.  They now have a lawyer, and the sale has been stopped, for the moment anyway… Chase won’t accept any more trial payments, which is another word for “payments”.  It must be nice to live in your home after paying what the bank told you to pay every month, knowing that at any hour you could be told you are out on the street.

Of course, no one in the family is in the U.S Armed Forces at the moment… perhaps the 8 year-old could sign up now, but be permitted to defer her enlistment for a decade when she’ll turn eighteen.  Would that make this family any more deserving of relief in the eyes of our legislators?   I’m not sure I can think of anyone that deserves to be illegally foreclosed upon, can you?

Just two weeks ago, I was introduced to a couple who had just been approved for a loan modification by Bank of America… the only problem was that Fannie Mae was going to sell their home in 24 hours… and BofA wouldn’t be able to “issue” the modification for 48 hours.  Should be an easy one right?

Wrong.  Fannie refused to postpone the sale date, even though BofA informed them that the loan modification was a day away.  Now, is that an illegal foreclosure?  If it’s not, then I have nothing to say to the leaders of this country except that you should all be ashamed.  The couple filed bankruptcy to stop the sale… they didn’t want to… but Fannie Mae, our bankrupt mortgage mess, forced them to do it.  Of course, neither of them is active duty military either.

Want some more… give me a couple of hours and I could provide you with a few hundred… just off the top of my head.  Let me check my notes and call around and I’ll come up with a thousand within 24 hours.

Sen. Franken, however, only referred to the revelation of mishandled foreclosures for those in the military a scandal, saying in an interview last Thursday:

“If people broke the law and foreclosed on service members, they should be indicted.”

I don’t want to put words into Al’s mouth here, but what if people broke the law and foreclosed on just regular old U.S. citizens?  What should happen to them as a result?  Community service?  A stern talking to?  When did it become relatively more acceptable to steal homes from ordinary U.S. citizens than anyone else?  What about stealing homes from veterans?  Does that fall somewhere between active duty and never served?  What if someone served in the Peace Corps?

The senator’s letter went on to say that the GAO’s report described mortgage servicers hiring employees to sign tens of thousands of affidavits without ever looking at the documents to determine if the loan was in default.  And isn’t it nice to see the GAO reporting robo-signing seven months after new of the practice first made headlines.

The study also pointed out the same things the OCC, OTS, and Federal Reserve’s study pointed out about three weeks ago, such as:

“Documents used to force people from their homes were not properly prepared or legally notarized. Foreclosure work contracted by loan servicing companies to third parties received little or no oversight.”

Sen. Franken, perhaps coming out of a coma that lasted two years said…

“Loan servicers make it difficult for delinquent borrowers to even talk about solutions.  I’ve talked to so many people who try to go to their servicers and can’t get in touch with anyone.  When they can reach the mortgage company, they never speak to the same person twice to try to work on ways to save their homes.  A single point of contact is the most important thing in any of this.”

You know what, Sen. Franken… I like you.  I think you’re a very smart guy who is also very caring and I even think that you ran for public office for the right reasons.  I even read your last book, and enjoyed it very much.  But let me assure you of something, Sir… you are in no way qualified to ascertain what “the most important thing in any of this” is or is not.

Like all of your peers in our legislature, you are incomprehensibly late to this tragic party, your contribution to anything having to do with the foreclosure crisis has been woefully inadequate, assuming you’ve done anything at all… and from your statements it is clear that what you know about the what’s gone on or continues to go on as related to foreclosures in this country we could fit in a thimble.

Look, don’t get me wrong, Sen. Franken… I’m glad you’re finally here taking a look, and I’m happy that the little you’ve seen offends you and a few of your legislative pals.  And by all means, get out there and make some strong statements in support of our troops, after all being a Democrat you pretty much have to do that or risk Rush Limbaugh calling you a pansy or whatever, right?

But this is a crisis that has been going on at least three full years now, and it’s gotten no better during that time, which you guys have been playing around with the pretend priorities of partisan politics in Washington D.C.  We all see that… you’re not fooling anyone.

Why do you think it was that the Dems got “shellacked,” as the president put it, in the midterms?  That’s right, it was the foreclosure crisis and your party’s dramatic and unconscionable mishandling of everything related to it.

So, go ahead… help stop our men and women in our Armed Forces from losing their homes as a result of what is plainly criminal behavior on the part of mortgage servicers… behavior that you and yours have essentially condoned for the last TWO YEARS.

It’s you and your peers that have allowed these egregious acts by servicers to strip people of their most valuable and treasured assets illegally.  You’ve stood by and done nothing… and now you’re reading what is just another in a continuing series of reports that all say what you have either known or should have know for the last two years.

So, fine.  Better late than never, but don’t add insult to political expediency by standing up at the microphone claiming that there is some meaningful distinction between stealing someone’s home through illegal foreclosure when they are active duty military because if that’s true… what about if it happens to a police officer… or a public school teacher… or a firefighter… or an emergency room nurse… or just a hard working American citizen caught up in the same financial crisis as everyone else… a crisis not of their making, but one that was created by the very same bankers now behind the illegal foreclosures.

Do something Sen. Franken.  The letter talked about in this article was signed not only by Sen. Franken but also fellow Democrats: Sen. Robert Menendez of New Jersey, Rep. John Conyers of Michigan, Rep. Luis Gutierrez of Illinois and Rep. Mike Capuano of Massachusetts.

But, you are going to be held to a higher standard because that’s why you came to Washington D.C., right Al?  Because as we used to say, if you’re not part of the solution, you’re part of the problem.  And not to put to fine a point on it, Sen. Franken, but at this point in time, that would make you what, as far as the foreclosure crisis goes?

Mandelman out.


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