THE BLOG
03/19/2013 03:59 pm ET Updated May 19, 2013

OCC's Magical Mystery Foreclosure Review

"Sign up, Sign up" for the Magical Foreclosure Review proclaimed a one-sheet circulated by OCC through a matrix of anti-foreclosure and community groups last year. "If an error is found, you could receive a payment or other compensation that may include refunded fees, stopping of a foreclosure or payments up to $125,000 plus equity." Frankly, it sounded like a late night TV advert for an ambulance chasing law firm.

Well, now you see it, now you don't. Quicker than you can say Office of the Comptroller of the Currency the Obama administration's promise to do justice for over four million foreclosed homeowners has evaporated into the could-have-been ether.

It's been a long ride aboard OCC's version of the Beatles Magical Mystery Tour. The journey started auspiciously enough in the wake of the 2010 robo-signing scandal when OCC announced a sweeping settlement in April 2011 that forced a number of major servicers to submit their foreclosures, circa 2009/2010, to an independent review process. The goal: to determine whether all the foreclosure t's were crossed and the i's dotted in the paperwork that greased the road towards eviction. Yes, it seemed like an arduous labor intensive endeavor but let's face it when one seeks justice the road is never smoothly paved and often runs steeply uphill.

The foreclosure review bus seemed to accelerate smoothly out of the starting gate but soon hit some major potholes. First, the good folks at Rust Consulting, tasked with finding the foreclosed, sent millions of letters to last known addresses; a strategy which seemed to defy logic. Who, pray tell, would be around to pick up the mail? No doubt the miserable response rate -- something like 5 percent -- forced OCC to extend the deadline for applying, but like a toddler learning to swim and splashing about a bit too much the GAO quickly weighed in with some scathing admonitions. A report issued by the oversight agency in June 2012 chided the OCC's outreach effort for being so confusing, so lacking in clarity that most homeowners who actually got the materials probably considered it annoying junk mail, depositing the missive in the nearest circular file.

OK, back to the drawing board. Now, OCC was going to do it right, extending the deadline to the end of 2012 and playing catch-up by printing loads of clearly written one-sheets announcing the review and spending scads of taxpayer monies advertising in major market media outlets like the New York Times (a full page ad, no less). The dire warning to homeowners: take your place on the Magical Foreclosure Review Bus by December 31, 2012 or you'll lose your seat.

Then a funny thing happened on the way to the hoped for destination a/k/a justice served. The Magical Mystery Foreclosure Review Bus ground to a halt. OCC short-circuited the process in January, 2013 and started talking about how expensive it was to get this bus going again; it'll take too long a time, and wouldn't it be peachy if we could come up an algorithm of some sort that measures "harm" which we could then use to dole out a little bit of money to all those homeowners whose lives were totally dislocated by Bankers Behaving Badly. Sounded a bit like legendary 19th century Tammany Hall leader "Boss" Tweed, headed down to the New York slums at Christmastime to hand poor families a bucket of holiday coal, a token gesture meant to put to rest any mumblings and grumblings by his less fortunate constituency.

This radical change immediately raised hackles: Who was driving the Magical Foreclosure Review Bus and what constituency was OCC serving? The industry seemed downright joyful claiming vindication in articles like one published Forbes, "Finding Little Evidence of Foreclosure Fraud, Feds Give Up."

Accusations started launching faster than a battery of patriot missiles. American Banker weighed in with a piece, "OCC Bungled Foreclosure Settlement from Start to Finish," taking the agency to task for using magical thinking to quantify the amount of harm to an imagined percentage of foreclosed homeowners. "The settlement should fit the harm, but the Office of the Comptroller of the Currency is making the harm fit the settlement." Like Gilbert and Sullivan's Mikado, it was all a bit topsy-turvy, encouraging some of the hired analysts -- those committed to doing the right thing -- to emerge from the woodwork complaining that the process was doomed from the start, largely overseen by the perpetrators of the problem -- the banks -- who wrote the scripts regarding what should and shouldn't be looked for and those things that were critical to gauging whether a foreclosure was carried out appropriately, for instance, unbroken chains of title and properly endorsed assignments, fell into the latter category. One experienced analyst involved in the Bank of America review was not only apoplectic about the interference but furious over the hiring of many analysts with absolutely no real estate or mortgage experience. He described a scene in his reviewing facility as a "kindergarten" with fellow employees more interested in what's for lunch than what's in the files.

In a phone-in press conference organized by the OCC on February 28 there was lots of talk about percentages. Through some feat of hocus pocus the OCC came up with a figure of 4.2 percent of total homeowners who they felt were harmed in ways that required reimbursement. Listening to Morris Morgan, OCC Large Bank Deputy Comptroller, discuss percentages you'd think he was talking about lab experiments involving fruit flies not the lives of millions of homeowners. Interestingly, a few days after the conference the Wall Street Journal published an article, based on anonymous sources, claiming that the actual figures were more in the realm of 9 percent at Bank of America and higher still at Wells Fargo at 11 percent.

Then there was a trip on OCC's Maid of the Mist through a "Waterfall of Borrower Categories," a graphic matrix of eleven slots that bucketed homeowners into categories of "harm" raining down from the most serious -- active duty soldiers and sailors targeted for foreclosure -- through foreclosures carried out while the borrower was not in default and trickling down to the final category, a catchall "other." This last slot, according to ex-Litton Loan Servicing executive Chris Wyatt, is where 95 percent of impacted homeowners will be deposited regardless of how egregious their foreclosures may have been, a fact we'll never know considering the tool for determining the actual harm -- the reviews -- has been bucketed out with the trash.

So now it's a too bad, tough luck situation for homeowners. They'll have to take whatever compensation the banks think they deserve regardless how screwed up their foreclosures might have been. In short, according to Wyatt, the banks have become the foxes guarding this foreclosure hen house.

The current agreement doesn't require homeowners to sign a waiver promising not pursue further litigation. Sounds good, but that presumes that the same deep legal pockets sported by the foreclosure industry are worn by the already harassed, foreclosed and beaten down homeowners.

Yes, good luck screwed homeowner; if you feel that you haven't been compensated fairly then see if you can find a lawyer to take your case.

Joel Sucher, a filmmaker with Pacific Street Films in Hastings-on-Hudson, N.Y. is working on Foreclosure Diaries, a documentary about the financial crisis and has blogged on foreclosure related issues for both American Banker and Huffington Post.