It's all about how millions of Americans who may have been thrown out of their homes, or at least forced to stress about the possibility, were denied access to information that might have revealed how widespread the foreclosure problem was. It's also about how all-powerful and pervasive the power of the Mega-Banks over those folks at the Fed and Office of the Comptroller of Currency (OCC) charged with protecting the public from the shenanigans of said Big Banking Guys. The evocative term for this suck-up relationship: "regulatory capture."
Remember the so-called Independent Foreclosure Reviews ("IFRs") announced with much fanfare by both OCC and the Fed in 2011? It was a knee-jerk response to the wave-making headlines about how the banks and their servicers brought in dummy "robo-signers" whose job it was to assist those with John Hancocks adorning foreclosure documents from developing severe writer's cramp. In the furor over the revelations, it was discovered that there were legions of Linda Greens of all sizes, shapes, genders, so many in fact that it wouldn't be surprising to find future gatherings of these namesakes reminiscing about their ill-played pasts.
There was much hoopla and grand fanfare as the regulators geared up for an outreach effort to find some 4 million-plus homeowners who had been shoved into the foreclosure pipeline in the years 2009 and 2010. The idea was to get them to apply for reviews of their cases conducted, allegedly, by "independent auditors" selected by the banks and approved by the Fed and OCC. That effort was so abysmal that the GAO was forced to issue its own report discussing why it made no sense, among other things, to send letters to foreclosed homeowners at the address of the properties that they had long since been thrown out of. In typical "I'm sorry we screwed up" fashion the regulators reacted by frantically taking out full-page ads in major media letting these hapless homeowners - wherever they may be -- know that they only had until December 31, 2012, to take advantage of this once in a lifetime opportunity to get a bit of justice done.
Then, lo and behold, the OCC and the Fed scrapped the entire review in January 2013.
It seems that the process itself was getting a bit sticky and messy with revelations that the "independent auditors" suggested by the banks and approved by the Fed/OCC were not so independent after all. Information started leaking out that staffers hired to vet the individual files of those who had submitted their foreclosures were actually having to do so with representatives of the banks, who had initiated the foreclosures in the first place, looking over their shoulders. Congressional hearings, convened shortly after the process was initiated, turned up additional information that accounting firms with time honored names like Deloitte & Touche, along with lesser-known firms like Promontory and Navigant, were raking in the fee-scratch to a tune of more than two billion big ones. In the end the Fed and OCC said screw it, shut it down, the house of cards we constructed in ramshackle fashion is collapsing and so to cover our backsides let's just dole out a few bucks to everybody who had suffered through the foreclosure process and damn the facts as to whether the hurt was small, medium or extra large.
It sounded like a solution... at first. But it was akin to New York's 19th-century "Boss Tweed" handing out a vote-getting buckets of coal to the poor and needy at Christmas -- good for a day's worth of warmth, then you're left on you own. Most homeowners received less than $6,000; many received a sad check for $300. It was a "sorry-for-your-loss" moment, now take your money and get lost. And, yes... you don't lose your right to sue by cashing the check, however, you'll have to find a lawyer willing to take your case and go head-to-head with suits from white shoe firms like Sullivan and Cromwell. Good luck.
Why were the IFR's put to bed was a question that raised the hackles of Congressfolk like Elizabeth Warren, Elijah Cummings and Maxine Waters and when Warren, during hearings in April 2013, started putting that inquiry to the Tweedle Dum and Tweedle Dee team representing OCC and the Fed the answer was daresay, interesting. To put it in nutshell: That information is proprietary and revealing the whys and wherefores of how the servicers for the banks conduct their business would be revealing "trade-secrets." Yes, you heard it right... getting to the truth about what went down is verboten, like trying to steal the secret ingredient in Coke or KFC.
The 15 banks that were part of the IFR process got away with financial murder and I'm sure they felt like the Goodfellas who just pulled off the fabled Lufthansa heist made famous in the movie of the same name. The auditing and consulting companies went laughing all the way to the banks with their haul and the aggrieved victims? They got "bupkis," as my dear departed Grandma used to say in Yiddish. The depth and breadth of how much they were screwed may never be known given the regulator's "we ain't talking" policy.
It's a new day dawning down in that place they call the Beltway and with Congress expecting a new crop of Republicans to take their seats no doubt the backslapping, cigars and golf outings with financial services lobbyists will take off with alacrity. The forces I like to call "Foreclosure Inc." even have one of their own in place. It's "Mr. Trott goes to Washington" and the man who led a Michigan-based foreclosure law firm that bears his name will now sit in the hallowed halls of Congress. I don't doubt for a minute that in Orwellian fashion he'd love to re-write or erase the memory of the sordid foreclosure scandal, or even worse, help make the process easier.
There's little coming out of the mainstream financial press these days related to the foreclosure issue. Maybe they see it as past history. One colleague called it "foreclosure fatigue." However, intriguing stories periodically pop up -- clues, let's say, to how the buddy-buddy system works in the higher realms of the financial services industry. I'm thinking about recent revelations by Carmen Segarra, who worked at the NY Fed and former servicing executive, Chris Wyatt, who went public with allegations regarding Goldman Sachs.
There's Pulitzer gold in them thar' hills for any mainstream financial journalist with the resources and the inclination to pick up the trail. The threads are out there, waiting to be tied together.
Joel Sucher is a writer/filmmaker with Pacific Street Films and currently working on a memoir titled Intent to Accelerate: Musings on the Foreclosure Crisis. He's written on the subject for American Banker, Huffington Post and In These Times. In 2013 he received $1300 as part of the IFR settlement; the result of a failed foreclosure attempt in 2009 by Litton Loan Servicing, then owned by Goldman Sachs.