OCC Foreclosure Review RIP – Anyone Care for Cheese With their Whine?
If you want to join the crowd whining over the cancellation of the OCCâ€™s Independent Foreclosure Review (â€śIFRâ€ť) Process, go ahead. Â But why anyone is whining about the cancellation of this New Coke-on-steroids type of idea is frankly way beyond me.
First, I watched the media jump all over the story of the OCCâ€™s abrupt cancellation of the Independent Foreclosure Review, armed with wild innuendo as they blamed the banks for the crime of the settlement. Â And then, the next day, I watched them turn intoÂ disappointed children as theyÂ begrudgingly shifted the focus to the OCC, Â as the story turned out to just be another failure by a government agency.
Letâ€™s make sure we understand what weâ€™re talking about here…
On September 19, 2011, when acting comptroller, John Walsh, announced that the Office of the Comptroller of the Currency (â€śOCCâ€ť) would be conducting an â€śindependent reviewâ€ť of something in the neighborhood of 4.5 million loans in order to determine whether anything untoward was done in the foreclosure process, most everyone I know just laughed. Â No one, and I do mean not one person I know, took it the least bit seriously.
The offer to homeowners was both straightforward and cryptic… homeowners could complete a questionnaire, submit their case for review and if they were in fact deemed to have been â€śdamaged,â€ť they’d be â€śentitledâ€ť to something called â€śremediation.â€ť
The OCC promised to notify eligible borrowers by the end of 2011, or borrowers could call in and be sent the form needed to apply for the review.Â And the whole thing was to be over by April 30, 2012.Â After that, one supposed, you could just wait for your â€śremediationâ€ť to arrive by mail.Â What could possibly go awry?
My advice to homeowners at the time was basically… oh, what the heck, itâ€™s free and maybe theyâ€™ll send you something for your torture… I mean troubles, for your troubles, I meant troubles.Â And then I went back to bed.
Most housing advocates, seemingly in a rush to overstate the most obvious and least fixable aspect of the process, immediately started whining about the use of the word â€śindependent.â€ťÂ They were concerned that the banks would fix the game by sending in a team of foxes to report on how the chickens were doing.
I wasnâ€™t concerned with this aspect at all.Â Why worry about the independence of the companies hired as reviewers when the whole show is being conducted under the ever vigilant and watchful eye of the OCC? Â You’re worried about the independence of the reviewers? Â I’m more worried about the independence of the OCC itself.
If ever there was a federal regulator that made it abundantly clear by exactly whom their bread was buttered, the OCC is it.Â Itâ€™s like they must have the same sort of deal Ed Demarco had, some sort ofÂ contract assuring them that they need not concern themselves with what the American people think. Â It’s like if you referred to someone from the OCC as a â€ścivil servant,â€ť he or she would just laugh… and then all your credit cards would get cancelled.
The problem was that you werenâ€™t going to be able to find companies with the capability to conduct the reviews that didnâ€™t have some prior relationship with the giant financial institutions.Â In this country weâ€™re down to the BIG 4 accounting firms, right?Â Which one do you suppose has never worked for Wells Fargo, JPMorgan or Bank of America?
The better question in my mind was: What could actually come from the lack of independence among reviewers?Â Would it really have an impact on the amounts awarded to borrowers?Â And more importantly, how would these â€śdamagesâ€ť be calculated exactly?
Because thatâ€™s the real question is… the one that no one is asking or even mentioning… the 800-pound gorilla in the bank, as it were…
â€śWhen the home you lost to foreclosure was $200,000 underwater and you hadnâ€™t made a mortgage payment in two years, and they find some sort of procedural error caused you to be declined for a loan modification that was a voluntary concession in the first place… how much remediation would that entitle the homeowner to in American money?â€ť
If you really slow down and think about it, you have to ask yourself the following question: Would Bank of America actually attempt to fix a process so as to deny remediation to homeowners who were legitimately damaged in the foreclosure process?Â How exactly would the bankâ€™s top executives covertly go about doing something like that?Â And why would they even try?
Before you answer, consider the scale of the situation here.Â
The OCC said there would be 4.5 million eligible homeowners.Â If each homeownerâ€™s file required 10 hours of review, that would be 45 million man-hours.Â Assuming a seven hour a day job, and 250 working days in a year, that would require just under 26,000 years for one person.Â If you had 1,000 people trained and ready to go on the reviews, then it would only take 26 years to complete them, and if you had 10,000 trained reviewers on 2.6 years.
But, considering there were no trained reviewers to start with, what we had here was just a dumb idea. Â
My point is that Bank of Americaâ€™s executives would have to persuade thousands of people to corrupt a process that would go on for several years… and not tell anyone.Â The chances of that working are zero point zero.Â And what would their motivation be… to reduce the amounts the bank would be ordered to pay to borrowers?Â Youâ€™ve got to be kidding, right?
This is the OCCâ€™s foreclosure review process, remember?Â Is anyone actually thinking that the OCC was going to bankrupt the banks by imposing enormous penalties for violations in the foreclosure process? Â Does anyone think that the OCC was going to hand out mega-bucks to borrowers that hadnâ€™t made mortgage payments in a couple years?
Heck, Iâ€™d be shocked to hear there was support for sending borrowers identified by the OCCâ€™s review process sympathy cards that just said, â€śWeâ€™re Sorry.â€ť
Paul Kiel of ProPublica wrote a piece last October accusing, in so many words, Bank of America of improperly influencing the review process. Â His article presented a series of circumstantial factors that strung together loosely could easily make someone think something nefarious was happening, including the fact that Bank of America sent 1750 employees to assist in the review process.
(He also had a couple of Bank of America internal memos, which I read while writing this article but they only verified my thinking that the probability of this happening was nil. Â You can read the Bank of America memos HERE and Kielâ€™s piece HERE.)
First of all, if it were happening youâ€™d never be able to keep it a secret for very long as there would be thousands of people who would have to be in on the conspiracy.Â Second, what happens with any individual loan is not terribly important to Bank of America.Â Banks and Â mortgage servicers donâ€™t even do much if any accounting at the loan level, they write down and reserve for losses only at the pool level.
Bank of Americaâ€™s response to Kiel was that they had assigned personnel to the review process in order to help it move faster, and after I read recently that PWC had billed something like $1.2 billion for services provided as part of the review, I understood why.
Have you ever seen what the computer screens look like at a bank?Â CVC, SDL, POS, PAD, MCC, FI, TID, LOF, EBT, AMU, LNR, PAL, ISPM, INT, TXN, AML, S/O, DA, CPS, DSR, EDS, AUM, BA, AMA…Â I mean, itâ€™s not exactly Windows 2005.Â When people go to work at a place like Bank of America, thereâ€™s serious time devoted to being trained on the bankâ€™s various systems.Â Itâ€™s not like I could hope to find much of anything by simply sitting down at a terminal and clicking around.
So, with consultants billing hundreds per hour, the idea that one just spent $3200 trying to find the NOD associated with a certain foreclosure, had to drive Bank of America insane so they stepped up and sent 1,750 employees to assist with the review, according to Kielâ€™s article.Â He obviously didnâ€™t find that number to be meaningful, but at $4,000 a month in salary and benefit cost, thatâ€™s $7 million a month… $84 million a year… to help reviewers find wrongs committed by the bank.
The OCC’s review was undoubtedly slated to cost Bank of America billions in the aggregate. Â And I have to believe the bank would much prefer to write a check for billions to homeowners wronged in the foreclosure process than to PriceWaterhouseCoopers and Promontory.
Kiel admits that the OCC specified the eight tests used to determine whether a homeowner was harmed by a bank and Promontory, the company hired by the OCC to oversee the review process, would be making the final determination on compensation to homeowners based on violations found during the review.Â Even so, Kiel wants the fix to be in with Bank of America and the Independent Foreclosure Review, even if he has to build a guilt-by-association type case against the bank everyone loves to accuse.
On February 24th, I posted an interview with one of the â€śindependent reviewers,â€ť who had contacted me to tell me what a sham the review process really was. Â But, he wasnâ€™t saying that Wells Fargo was rigging anything, his point was that the entire program was being run by a trained corporate seals.Â And I had no trouble believing that, how could it not?
As of June 25, 2012, 193,630 homeowners had bothered to apply, and 144,817 files had been selected for further study.Â The OCC, recognizing that the numbers were not exactly approaching the 4.5 million eligible,Â the agency started advertising that borrowers could win up to $125,000 for foreclosure violations.Â As reported by the San Francisco Examiner…
The 14 firms, also including Wells Fargo & Co., could be instructed to give lump-sum payments between $500 and $125,000 in each case involving improper practices, the regulatorsÂ said.
I didnâ€™t know thereâ€™d be fabulous cash and prizes.Â I awaited the promotional tie-ins…
But thatâ€™s not all… The OCC says that the first 500 homeowners who were reported by the bankâ€™s internal systems as being suicidal in 2009, will each receive Appleâ€™s fabulous new iPad Minis!Â Think Independently!
Then, only a month later on July 25, 2012, the Government Accountability Office (â€śGAOâ€ť) conducted its own review of the OCCâ€™s review and found that the reason for the light turnout by homeowners was that the whole thing was just â€śtoo complexâ€ť for us… the presumably stupid homeowners… to understand.Â (I had a ball with that story, which you can find HERE.)
Government Failing – A Rich Tradition
I understood the whining over HAMPâ€™s apparent failure.Â I mean, HAMP was the presidentâ€™s program, announced with much fanfare, touted as being something along the lines of the man-sitting-tall-in-the-saddle-on-white-horse that had ridden in to town to save the USA.Â And then instead of that, it turned out to be, â€śShut-up and wait in the closet until my husband leaves…. shhhh.â€ť
HAMP as handled by the U.S. Treasury and over a hundred mortgage servicers, was unlike any federal assistance program I had ever seen in action, but with no one forecasting an outbreak of competence inside the Beltway anytime soon, Iâ€™m sure thereâ€™s plenty more coming.
I knew HAMP would have problems from the moment I heard the words that are the kiss of death for any housing rescue program… â€śResponsible homeowners.â€ť Â
Want to know why that’s the case? Â It’s because thereâ€™s no such thing as â€śresponsibleâ€ť or â€śirresponsibleâ€ť homeowners.
All homeowners are â€śresponsibleâ€ť people.Â Or, to be more accurate, 99.9 percent of homeowners are responsible people.Â Some minuscule percentage of any group make up the small tail of the bell curve.Â The simple fact, and we all should know this, is that buying a home in this country has always been the â€śresponsibleâ€ť thing to do.
Programs designed for â€śresponsible homeownersâ€ť fail because theyâ€™re designed to draw a distinction that doesnâ€™t exist. Â No one goes out and buys a home they canâ€™t afford on purpose.Â No one goes out and intentionally buys a car with payments they canâ€™t afford either.Â As any homeowner will readily tell you, besides the obvious aversion to foreclosure and eviction, mortgage payments are only a part of the cost of homeownership.
You havenâ€™t really lived until youâ€™ve taken a look at the price tag for new drapes and other window treatments, and after your wife starts talking about how much she loves granite countertops or hardwood floors, you wonâ€™t even remember your mortgage paymentâ€™s amount for months, and next thing you know youâ€™ll be letting her drive.
You can drop ten grand in an hour organizing your garage.Â Youâ€™ll find the guy youâ€™ve been talking to about landscaping speaks much better English than you thought when presenting you with his bill.Â And you canâ€™t do all that around your new home and leave the kids rooms looking as stark as an empty rental… I mean, what will your friends think when you give them the nickel tour?Â And donâ€™t forget the patio furniture…
No one goes through all that and more, files a change of address form with the Post Office, enrolls children in new school districts, orders new checks and business cards, in order to end up a year or two later having to tell the family not to tell the person calling that youâ€™re home. Â And the idea of having to tell your son or daughter that theyâ€™ll like the duplex youâ€™ll soon be renting because of the playground thatâ€™s only a block away is something every parent on the planet places at the top of their lists of conversations they never want to have.
If someone canâ€™t afford their mortgage payment, itâ€™s because something bad has happened to them.Â And after 2008, if someone couldnâ€™t make their mortgage payment, we should all know what the â€śbadâ€ť thing was because itâ€™s the same â€śbadâ€ť thing that happened to everyone else… and to every company from Wall Street to Main Street.Â Believe it or not, the reason someone couldnâ€™t make their mortgage payment in 2009, was fundamentally the same reason General Motors needed to be bailed out by taxpayers for $25 billion that same year.Â The only difference was that homeowners didnâ€™t get to fly to D.C. in their Gulfstream G550s.
We are, however, a judgmental bunch, as this crisis has shown me, and regardless of the abundant evidence of the economic meltdown not being the fault of homeowners, those losing homes to foreclosure since the crisis began have found themselves treated no differently than any other irresponsible deadbeat borrower in history.
HAMP Fail – Part 2
HAMPâ€™s failure came in two parts.Â The first was the entirely predictable failure of the program to save more homes.Â Original estimates claimed HAMP would save 3-4 million homes from foreclosure, but more than four years in, and the program has only saved something close to a million.Â That may be considered a failure by some standards, but as federal programs go HAMP’s the Olympic Gold Medal winner by far.
The part of the failure that came as a total shock to me was that when you signed on to the HAMP of 2009, not only were you treated like a deadbeat losing a home to foreclosure, but included in the price of admission, you also got the financial services industry equivalent of waterboarding.
The torture component was a new one on me.Â I mean, who will ever forget the popular game that was fun for the whole family, endearingly referred to as, â€śSurprise, Youâ€™re Home Sold!â€ť Â
Honestly, I had never seen anything quite this abusive.Â Unsuspecting homeowners would head out for a Sunday matinee, only to return home to find two guys peering in their windows and identifying themselves as the investors who bought the home at an auction earlier that day.Â Surprise, Your Home Sold!
Thatâ€™s what I call service.Â Surprise, Your Home Sold!Â Arenâ€™t you happy?Â We knew you wanted to dispose of that fire hazard you call a home, so basically we went ahead and took out the trash for you.Â Gosh thanks, guys… you shouldnâ€™t have.Â I mean you REALLY REALLY shouldnâ€™t have.
Oh Sure, Now the Media Shows Up at the Party…Â
The mainstream media is a shameless bunch, thatâ€™s for sure.Â They smelled blood and started typing out stories about the failure of the OCCâ€™s IFR faster than you could say, â€śbillable hours.â€ťÂ To read them all feigning shock and recoiling in horror at the very idea that homeowners would lose their opportunity for a shot at justice for me anyway, was absolutely nauseating.
A few members of Congress also jumped up for an entirely undeserved photo-op.Â I sure hope the president just stays quiet about all this… just donâ€™t say a damn word, Sir.Â It simply wouldnâ€™t be prudent, not at this juncture.Â All I want to hear President Obama talk about now is anything but foreclosures.
You know what would have been nicer… it would have been nicer to see the media out talking about this abomination while it was happening, as I and a few others certainly were.Â But you in the mainstream media were still fawning over Barack Obama… the smart president… his plan could not fail… swoon.
None of this happened in an instant. Â It was like watching a slow motion train crash. Â The OCC, FDIC, Treasury, the White House, Congress, state legislatures, and every major media outlet, among others, had all the time in the world to do something to prevent what happened to homeowners in 2009 and 2010. Â Everyone could have moved with the speed of a 90 year-old on a walker and still got there in plenty of time.
But, instead… nothing. Â Not a word from any government agency, and as to the media in 2009, well… let’s just say it was underwhelming and leave it at that.
Well, I guess Iâ€™m glad you finally made it… come on in… thereâ€™s still plenty of food.Â But donâ€™t think I donâ€™t realize that you media types that arrived late to this party are part of what allowed all those homeowners to be abused in the first place.Â You know… back when you didnâ€™t have any idea what the foreclosure crisis was or what it was doing to homeowners.
We all knew this OCC IFR nonsense was nonsense… you lost us at â€śOCC,â€ť as a matter of fact.Â Yves Smith over at Naked Capitalism had this one nailed tight from beginning to end.Â And it makes me ill to think about how much time I wasted actually trying to write detailed explanations of what was involved and being offered… my best efforts so that no one would forego applying on my account.
Itâ€™s funny too, when I think about it, because my expectations could not have been lower, and yet somehow, some way… you managed to let me down regardless.Â Luckily, the people saw this even more clearly than I did as being just another Geek Tragedy, and one theyâ€™d seen before, so this time few even bothered showing up at the theater.Â Good for them.Â That they all ignored you at the OCC… that is their prize.
Itâ€™s time to do away with the OCC, it doesnâ€™t matter if we donâ€™t have a replacement ready.Â Park an ice cream truck in its place for a year… same intellectual firepower, and with the communication skills of a Klondike Bar on a warm day.
Where were you in 2009?Â Trying to solve the problem, and you?Â Here is just a partial list of my articles from 2009… Just what I wrote on the torture that has become HAMPâ€™s legacy.
Superior Court Judge Says HAMP Has No Teeth