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WillyT Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Apr-04-11 07:55 PM
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Imminent OCC Enforcement Order on Banks Barely a Slap on the Wrist for Foreclosure Fraud - FDL
Imminent OCC Enforcement Order on Banks Barely a Slap on the Wrist for Foreclosure Fraud
By: David Dayen - FDL
Monday April 4, 2011 2:32 pm


I enjoyed the 60 Minutes story last night on the mortgage mess, because it actually went beyond robo-signing and touched on some of the more fundamental ways in which banks have committed fraud on state courts. Sheila Bair, in suggesting that individual homeowners could be paid off as a make-good for this trouble, and also suggesting that the banks could somehow cure this problem if they put enough time and effort into this, either displayed a misunderstanding of the issues or a not-very-credible recitation of the Administration line. In fact, some of these things cannot be fixed retroactively. The individual homeowner would have to give up due process rights for a cash payout that would result in them leaving their own home, and I simply dont know who would agree to such a setup in the real world.

Bair is right that this situation is getting away from the banks in the state courts. More and more cases are being overturned because ownership cannot be proven. This was supposed to be the pressure point that would force the banks to the bargaining table, to negotiate a settlement with state Attorneys General that would increase loan modifications and stop the record level of foreclosures. But banksters are nothing if not confident. They clearly believe they can weather this storm, and wont settle with regulators on anything that involves a penalty. Thats the right move for them, since state Attorneys General cannot make banks immune to individual homeowner claims. AGs can release claims over consumer protection violations and fraud on state courts, but they cannot indemnify the banks completely. So the banks would rather engage in a PR maneuver to prove that they are now complying with the law. Thats what the federal enforcement order, coming primarily out of the banks favorite regulator at the OCC, allows them.

Frustrated by the lack of progress with a global settlement between the 50 state attorneys general and the top mortgage servicers, federal banking regulators are expected to move forward with their own enforcement actions against 14 servicers as early as next week.

The cease and desist orders are expected to establish best practices for the servicing industry, including new documentation verification procedures, oversight from third parties and additional legal counsel, limitations for dual tracking foreclosures and modifications simultaneously, and a comprehensive look back to uncover prior mistakes.

If this sounds like the banks counter-offer in the AG settlement talks, thats because theres almost no difference. As Adam Levitin says, this is a regulatory equivalent of a Potemkin village. The banks would again run the show on compliance almost totally.


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Angry Dragon Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Apr-04-11 08:11 PM
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