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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Having 27 pages of a ‘proposal’ may not tell us much. It does not include, according to the Reuters update, the fines which may be forthcoming. That reads better then simply allowing servicers to opt out of any punishment when they were/are are still screwing homeowners.

The extent of how they have defrauded has not yet come to light. If anything, the homeowners seem to be pawns in an awful lot of fraudulent schemes by anyone they come into contact with. Even judges and lawyers seem to feel the industry is fair game.

As I said previously, it would seem that making mods mandatory means the banks will use their power and lack of ethics to ensure that those who didn’t have a chain of ownerships (eg…MERS) or the mortgage note, will tell the homeowner they MUST modify. (they have already been doing this)

Those mods that are beneficial to the banks will take precedence to homeowners in distress, mark my words. 011/03/04/the-bizarre-mortgage-%E2%80%9C settlement%E2%80%9D-negotiations/

MERS: The secondary market in nonprime mortgages operated under the financial version of “don’t ask; don’t tell.”

http://neweconomicperspectives.blogspot. com/2011/03/unanticipated-consequences-o f-mers.html

Posted by hsvkitty | Report as abusive

Incompetent mortgage servicers, fraudulent foreclosures, HELOCS taking precedence over first mortgages, and poor securitization practices are an entire circus’s worth of elephants sitting in the room.

We are seeing the true meaning of too big to fail. The banks have structured their business around such poor business models that nobody dares to expose them because the financial system would blow up again.

At some point, the lousy paper trail that is causing many of their foreclosure problems is going to be uncovered by some MBS investor who doesn’t mind blowing up the banks in order to get them to take back his MBS at close to par because that lousy paper trail means they never actually got the mortgages into the trusts backing the MBS. That may be the unexpected event that takes down the stock market to levels lower than March 2009.

It is clear that the banks believe that they are immune from any form of prosecution or market forces. Therefore they don’t believe that they need to provide service at the level that you would expect from your local dry cleaner or take-out restaurant.

I think it is going to get really ugly when all of the chickens come home to roost on these issues.

Posted by ErnieD | Report as abusive

I am not surprised by the implosion of these entities. Way back before low credit standards, subprime mortgages and the rest of it, my husband and I got our first mortgage at a rate of 10.25%. It was promptly sold to an out of state bank — in the meantime, the original lender failed to pay the taxes and insurance, and I assume they figured, why bother, we’re selling this baby anyway. A few years later, we refinanced and got another lender — who promptely and then not so promptly failed to pay taxes, until an employee at my county board real estate taxation unit personally called me and asked me if I knew that my taxes were delinquent — and told me that I was only a few days away from a tax sale (!!!!) of my house and that I better come down and pay the balance in person and then fight with the mortgagee for reimbursement. I am still grateful to this obviously diligent and conscientious individual. When I called the mortgagee, the employee apologized and said, basically, “We’re all so busy here with refis we just weren’t paying attention.” And that is the level of concern they have for the biggest investment of your life — which is to say, none at all.

Remember, this was all 10-15 years before subprime, before MERS. At least I knew who to call.

Posted by rb6 | Report as abusive

Oh the irony …. that such a proposal would be seen as unfair to the banks and their servicers. news/banks-protest-regulatory-fiat-26719 02-1.html

Posted by hsvkitty | Report as abusive