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A Liberal Is a Villager Who’s Been Screwed By a Mortgage Servicer

The past week has seen a pronounced evolution in the writing of Dana Milbank. Earlier in the week he severely criticized the incestuous relationship between the political and media culture in Washington – including engaging in a healthy dose of self-criticism – revealed by the Kurt Bardella email scandal. Where did this newfound self-awareness come from? Perhaps that can be explained by his latest piece. See, Milbank discovered that, regardless of his prominence in the DC journalism community or access to power, to the banks he was still nothing but a mark.

Last fall, my wife and I refinanced our mortgage with Citibank. Sixty days later, we received a “cancellation notice” from our homeowners insurance company “for non-payment of premium.”

Turns out Citibank, which had been collecting hundreds of dollars a month from us to pay the insurer, hadn’t made the payments. It was, I later learned, one of the usual tricks mortgage servicers use to squeeze more cash out of their customers. About a month later, I learned of another trick: Citibank informed us that it was increasing our monthly payment by nearly $300.

Along the way, a simple refi became a months-long odyssey: rates misquoted, interest charged on a phantom account, legal documents issued in wrong names, a mortgage officer who disappeared for days at a time (first it was his birthday, then his laptop was in the shop), a bounced check from Citibank’s own title company, and the freezing of our bank accounts.

Sometimes it takes only a little shared experience to recognize the major problems in our society. For Milbank to understand the mortgage crisis, he needed to experience it first-hand. And he recognizes that he’s one of the relatively luckier ones; borrowers without his income stream or resources are being forced into foreclosure when they confront these situations.

Now, I don’t totally agree with one of his premises, that House Republicans are about to make this worse by attempting to repeal HAMP. In fact, these routine stories of servicer abuse happen inside HAMP every day, because of a program that is entirely discretionary and a Treasury Department that has to this day offered no sanctions for abusive servicer conduct or violations of program guidelines. Milbank recognizes this but can’t tear himself away from the position of many consumer advocates, that HAMP is bad but better than nothing. This relies on a pipe dream that you could actually fix HAMP and make it work for consumers; I think we’re beyond that stage.

But Milbank gets quite a bit right in this piece. He realizes that servicers have no concern over foreclosures and in fact have the financial incentive to foreclose over a modification. He understands the illegal fee laddering and the forced-place insurance scandal and robo-signing and all the other illegal activities which have become endemic to the servicers. He sees that the Consumer Financial Protection Bureau would be in a position to rein in the worst of these abuses if they don’t have their funding and responsibilities stripped away by House Republicans and handed over to the Office of Bank Advocacy Office of Comptroller of the Currency. And this is a fine conclusion:

My wife and I are reasonably savvy consumers – she has a brand-name MBA, and I began my career as a business reporter for the Wall Street Journal – but we were no match for a bungling bank. After five months of trying, we still haven’t been able to resolve all of Citibank’s mistakes – nearly all of them, curiously, in the bank’s favor […]

That so much can go wrong with such a simple refinance doesn’t bode well for the 5.5 million homeowners in default (on top of the 3 million already foreclosed). It’s impossible to know for sure, but by some estimates, half of them are victims of some form of servicers’ errors.

“What happened to you,” Ira Rheingold of the National Association of Consumer Advocates told me, “happens to people every single day.” And it will continue, with its resulting drag on the economy, unless and until the big banks can be brought to heel.

If Dana Milbank didn’t come face to face with what homeowners see every day, I don’t believe this piece gets written. That’s often what it takes sometimes; the notion that it can happen to anyone doesn’t register until it happens to them. Now that there’s at least one person in the DC establishment who has had this experience, maybe he’ll pass this along to his colleagues, and keep writing about it. And maybe someday we’ll have an establishment which recognizes the depths to which our financial sector has stooped in search of profit.

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David Dayen

David Dayen