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Senate Democrats Criticize OCC Over Foreclosure Review Practices

A Senate Banking subcommittee on housing yesterday sharply questioned members of the Office of the Comptroller of the Currency over their foreclosure review process, and the lack of transparency thereto. I’ve been largely avoiding the OCC reviews because I think they’re a joke – the servicers get to choose their own independent consultants to carry out the reviews, and I don’t think you have to look much further than that.

Fortunately, Senate Banking Committee Democrats had exactly the same concern, so it made for some entertaining theater.

“If we do not remain committed to transparency, consistency, and accountability, the foreclosure reviews will be toothless,” said Sen. Robert Menendez, D-N.J., who chairs the subcommittee. “After being hard hit by the foreclosure crisis and other economic woes, American homeowners expect and deserve a fair review and compensation where appropriate.” […]

The consultants are also being paid by the servicers. Under questioning from Sen. Jack Reed, D-R.I., (OCC deputy comptroller and chief counsel Julie) Williams said that in some cases the consultants had previous business relationships with the servicers that hired them.

“Is there any prohibition on future work that these companies can do with the parties they’re supervising?” Reed asked.

“No, sir,” Williams responded.

Sen. Jeff Merkley, meanwhile, took issue with the fact that letters sent to homeowners, which informed them of their right to seek a review of their own case, did not reveal how the consultants are being paid, or the consultants’ past business ties to the servicers that hired them.

Williams danced and dodged for a while, proclaiming the reviewers independent, but it’s really a joke. These reviews will lead to almost nothing of value, you can book on it.

And just to give an indication of how the violations of law in the foreclosure process continue to hurt borrowers, consider this case from foreclosure defense attorney Matt Weidner. In it, US Bank actually pleads that a court order to verify documents in a foreclosure case “would require Petitioner to perjure itself.” That’s right, they’re saying that if they had to vouch to the court that the documents they provide proving ownership of a property were legitimate, they would have to lie to the court. Really. It’s on page 17. Specifically, US Bank says that the order “would require US Bank to attest to information to which it has insufficient knowledge.” The larger issue here is that US Bank wants to stay off the hook for legal exposure to verifying to foreclosure documents, instead putting it on their servicer. But the implication is clear: they do not want to be on the hook for proving ownership because it would constitute perjury.

So that’s where we’re at. That’s how bad it’s gotten. And the OCC wants to skate along while protecting fraudulent banks by allowing them to pick their own reviewers of their practices.

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David Dayen

David Dayen

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