Incompetent mortgage servicers read the writing on the wall

By Felix Salmon
March 7, 2011

How incompetent are mortgage servicers? So incompetent that faced with one of the most prominent journalists at one of the most prominent newspapers in the country, they contrived to subject him to, in his words, “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”.

These stories are less shocking than they should be, these days, just because we’ve heard them so many times. Which is why the banks are going to find it very difficult to say no to the 27-page proposed settlement being offered by the states’ attorneys general. Does anybody have a copy of this thing? I’d love to see the details of the principal writedowns and the like, but although everybody is writing about it (see for instance American Banker, Bloomberg, WaPo, NYT, WSJ) and the NYT in particular says that they have a copy, no one seems to have posted it.

The one thing which does seem clear is that the OCC is still completely captured by the banking industry. It’s the one arm of the government not signing on to the proposed settlement, saying that $20 billion is too much money and could harm banks’ finances. Which is ludicrous, given that banks are chomping at the bit to eat into their capital by paying out dividends. $20 billion is tiny, by the standards of the size of the U.S. banking industry and mortgage market. Anything less would be a slap on the wrist and tantamount to a nod and a wink giving banks the green light to go on treating people like Dana Milbank just as they’re being treated right now.

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