Those illegally foreclosed on get a pittance in return.
By John Lawrence
Banks foreclosed on military service members, homeowners who had been approved for a loan modification and even homeowners who were current on their payments. At least 53 homeowners who weren’t behind on their payments were successfully foreclosed on and lost their homes for no reason.
There was widespread criminal behavior on the part of the banks, but in a recent settlement they got off relatively cheap.
A foreclosure settlement between the government and 13 banks on April 9 spread $3.6 billion in cash among millions of borrowers. The consultants who determined how much each homeowner would get happened to be bank employees and will get $2 billion for their efforts.
The cash will be split among 4.2 million borrowers who were in foreclosure in 2009 or 2010 and had home loans serviced by Bank of America, Wells Fargo, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Aurora, Citibank, HSBC, MetLife Bank, PNC, Sovereign, U.S. Bank, and SunTrust.
Close to 1.2 million borrowers, or about 30 percent of the total whose properties were foreclosed on, had to battle potentially wrongful efforts to seize their homes despite not having defaulted on their loans, being protected under a host of federal laws, or having been in good standing under bank-approved plans to either restructure their mortgages or temporarily delay required payments.
Other abuses such as robosigning affected numbers of homeowners. Bank employees were paid to sign thousands of foreclosure documents despite no qualifications for the job in lieu of the banks getting the proper documents from their respective counties which would have cost them money and time. Despite all the criminal and fraudulent activities the banks engaged in related to foreclosures, they have not been prosecuted and have gotten off relatively scot-free. Millions of homeowners, however, have not been so fortunate. They have lost their homes to foreclosure despite having done nothing wrong.
The amount of money set aside to compensate those wrongfully foreclosed on is a mere pittance.
A total of 234,000 of the borrowers had worked out a new payment plan with the banks, but were foreclosed on anyway. This is known as dual tracking where one bank department was trying to foreclose on the home while another department worked out a loan modification. Evidently, the right hand didn’t know what the left hand was doing but that would be giving the banks’ criminal operations too much credit. Both hands knew what the other one was doing, and they did it in such a way so as to stick it to homeowners and make themselves the most profits.
After getting the homeowners to keep on paying something on their mortgages, they went ahead and foreclosed on them anyway. That maximized their profits and drew a cheer from Wall Street. After all, they do have to report their earnings to Wall Street, and Wall Street frowns when they don’t meet their projections. When profits are maximized, however, it makes investors and shareholders happy — and their charters make it clear that is their job above all else.
The government agency which carried out the so-called Independent Foreclosure Review, whose purpose was to compensate the wrongfully foreclosed upon, is called the Office of the Comptroller of the Currency (OCC). It is an agency that has been completely captured by the bank lobby and considers as its purpose the protection of the banks and not the homeowners. As a result homeowners who had lost their houses to the banks received a mere pittance in return for the experience.
The OCC determined that the banks themselves should hire consultants whose job it was to determine how much each homeowner was to be paid after giving each case an independent review. They were paid $250 per hour for their services. This came out of the total amount which was set beforehand to be divided up among the homeowners.
The nearly 1.1 million victims of dual tracking actually received $500 each.
Five hundred dollars for being criminally defrauded out of their homes. Five hundred dollars for being double-crossed, for being led down the garden path thinking they had worked out a payment plan. This was a criminal operation fully participated in by a government agency, the OCC. Another 865,000 were in the process of foreclosure even though they had worked out a loan modification when they were foreclosed on.
Here’s What You Can Buy for Having Your Home Stolen: about one hour with an attorney, a couple cases of booze, about ten pitchforks, 4 months rent in Alaska, 2 months rent in a storage facility, 300 boxes of Kleenex or an Apple iPhone.
A homeowner not in default got $125,000. They did nothing wrong. They were current on their payments yet the banks took their homes anyway — illegally I might add. Wrongfully foreclosing on active duty members of the armed forces is a criminal felony, but the banks merely have to pay $5000. For that, these lucky bastards could get a 2 meter dome tent.
Nobody has been indicted for these criminal felonies involving active duty service members, but that’s nothing new. The banks have been getting away with murder ever since the financial crisis hit in 2008 and Secretary of the Treasury Henry Paulson, former Goldman Sachs CEO, ran around Washington with his hair on fire.
Each of the wrongfully foreclosed on homeowners was supposed to get an individual review of their case, but instead the Federal Reserve and the OCC engineered a mass settlement. They, in essence, engineered a crime wave and determined that the banks should not have to pay for their misdeeds.
On Chris Hayes’ show, All In on MSNBC, Eliot Spitzer, former New York state Attorney General said: “The amount of money that was involved in the totality of the settlement … is less than the Treasury Department gave to Goldman Sachs to cover their exposure to AIG, which was $12 billion. Nobody said anything. Goldman just got a check for $12 billion. All the massive and wrongful foreclosures in the country only got two thirds of that. The amount of money is insanely low.”
He went on to say that the OCC is the paradigm of a “broken fraudulent regulatory body. It has been in the back pocket of the banks historically.” Pre-crash in 2003, Eliot Spitzer and the other AGs went to court concerning the subprime scandal. The OCC came in on the side of the banks to stop them. “We had to litigate all the way to the Supreme Court because the OCC was covering for the banks.” The OCC opposed mortgage writedowns. The OCC said, ‘No, we’re here to protect the banks not the entirety of the economy.’ ”
So this whole operation of redressing the grievances of foreclosed upon homeowners was essentially a sham designed by OCC to wipe away the banks’ liabilities in the cheapest possible way. The banks saved billions of dollars in getting this deal.
Alexis Goldstein, who also appeared with Spitzer on MSNBC, accused the OCC of outright lying by saying that the banks’ dirty, double-crossing dealings only affected a small number of homeowners. She said, “They were lying when they said there was a 4.2% error rate.” In actuality the error rate on the part of the banks was much larger.
Spitzer said: “There was an absolutely grotesque failure to do an appropriate review. The OCC should be eliminated.”
The totality of the settlement going to the victims is $3.6 billion while the amount going to the independent auditors who were actually bank employees is $2 billion.
If you were paid $500 as your settlement, and a consultant was paid $250 per hour to review your file and then they walked away with $10,000 while you got $500, how would you feel? The widespread practices of deceit, malfeasance and incompetence on the pert of the banks resulted in 4 million homeowners getting $3.6 billion while consultants walked away with $2 billion.
Subsequent to the announcement by the OCC, the banking subcommittee of the US Congress of which Elizabeth Warren is a member, grilled deputy counsel of the OCC, Daniel Stipano. It seems that the OCC has determined that all the proceedings involving the Independent Foreclosure Review will be kept secret. Even the US Congress will not have the right to know what went on in the determination of “awards” given to the aggrieved homeowners. Some open democracy this is!
The OCC will keep secret any and all information that the consultants considered. Why did the OCC let the banks hire consultants who were bank employees, and whose job it was to examine the banks and determine the amounts of money given to the wrongfully foreclosed? Apparently, Congress and the American people don’t have a right to know.
The banks have become to big to fail, too big to prosecute, even too big to exact a meaningful penalty.
The premise is that doing any of these things would hurt the entire economy, but, according to David Stockman, Reagan’s Budget Director, this is not true. He argues eloquently in a new book, The Great Deformation, that to bring down the big banks would not have hurt the Main Street banks or the Real Economy at all. The ATMs would not have shut down. Businesses would receive banking services as normal.
Yet, taxpayers gave $700 billion to the big banks as part of the TARP program and the Federal Reserve ginned up $7 trillion, which it dispersed not only to American banks but to banks all over the world. This was just to save the financial casino economy and had nothing to do with the economy that most Americans participate in. The Fed is still at it with Quantitative Easing, printing $85 billion a month and giving it to the big banks to gamble with.
But if you’re an average American kicked out of your home, even though you had been paying your mortgage or thought you had worked out a payment plan with the bank, you might just end up with $500.
Steven Peterson says
Excellent piece, Mr. Lawrence. Well researched, accurate and on point.
In the Senate hearing. one of the more interesting statements from Mr. Stipano, in response to Sen. Warren’s questions, concerned the findings of the review. Apparently, all evidence and information from the review is considered confidential and supervisory by the OCC. Sen. Warren asked, point blank, if there are any plans to release any information about illegal activities to the public, or to the families victimized by the banks under review.
There are no plans to release any of this information at this time – a few statements to “wrap up the IFR” – but the agency seems committed to protecting the banks. The only alternative left to the aggrieved homeowners in the wake of this process is to take the fight to the streets. The CFPB offers a means to start that battle. For a taste of what may come, see http://www.desolationpress.com/essays/supervisoryinfo.html
John Lawrence says
Thank you, Mr. Peterson for your comment. The Consumer Financial Protection Bureau (CFPB) should have had jurisdiction over the Independent Foreclosure Review. However, just before they were up and running, the OCC stepped in and took over the process thereby guaranteeing that the banks would get the ultimate protection.
Forclosing on deployed military familys is a falony. These banksters should be sent to Federal prison for at least 20yrs. for every one of the charges against them
Yes they should but it will never happen.
Mina Sirovy, PhD says
What you’ve described shows a terrible misuse of power at the expense of the little
guys who work very diligently to be homeowners. As a senior citizen I was recently
the victim of an internet scam involving gold and silver on the internet. However,
my credit union (Mission Federal) alerted me before I could wire more money.
I called a detective who investigated the internet scammers and closed them down.
I was lucky that my bank was alert and compassionate. I also got two-thirds of my money back! It pays to have a watchful bank, and I benefitted from being vocal.
Thanks, John, for your revelatory remarks about immoral banks. I was just lucky!
Dr. Mina Sirovy
Wes Demarest says
Thanks John for the report on the current state of morality with our banking system, a system that I thought our president was going to straighten out. It seems that his cronies are perpetuating this type of activity proving to me that party is irrelevant when it comes to banking. But then, when a government forces financial institutions to issue unsecured loans – with no possibility of recovering the principle – creative people will find a way to profit from it.
Where will it end? Recently he promoted once again that banks should go back to what caused the first “financial downturn” – issuing unsecured loans!!! Have we learned nothing? Damn, I wish I had gone into banking.
John Lawrence says
Wayne, it’s true that Obama has kept people around him like Timothy Geithner that are sympathetic to Wall Street. As far as the regulatory agencies though, I believe a lot of those appointments came from the Bush administration. I don’t think Obama has the power to just replace them all with people like Elizabeth Warren that would hold the banks’ feet to the fire. At least she’s a US Senator and is on the Banking Committee, and Obama promoted her from day 1. She designed the Consumer Financial Protection Bureau. Republicans would never have let her take charge of this agency though so she ran for Senator from Massachusetts and won, fortunately in my opinion.
The thing that adds insult to injury is that many of these service members who lose homes due to foreclosure, even if they did nothing wrong also end up getting administratively separated out of the service. If they’re in an occupation that requires a top secret clearance and have a weak unhelpful chain of command than their career is over. To make matters even worse, if one gets kicked for this kind of thing it usually ends up being an OTH (Other Than Honorable) discharge and that means no VA benefits, No G.I bill (even if they paid into it), no chance for Federal employment. A few cases like this have gone through my office.
Thank you, Mr. Lawrence, for exposing the lies and corruption of the OCC. As you perhaps already know, Gene Ludwig, CEO of Promontary, was the Comptroller under Reagan, and Julie Williams, who was Chief Counsel at the OCC and negotiated this farce of a review, is now a top executive at Promontary. Her replacement at the OCC? You guessed right: Amy Friend from Promontary. Shame on the MSM (Chris Hayes notwithstanding) for ignoring this “crime scene,” and shame on our President and the DOJ for looking the other way.
John Lawrence says
You are right about the revolving door where regulatory agencies are staffed by those entities that they are supposed to regulate. Then, when they leave (providing they’ve done a good job protecting the corporations that they were supposed to have regulated) they go back to work for those corporations and get paid princely sums for having protected them when they were supposed to be regulating them. The SEC and others work the same way. Of course a lot of these regulators were appointed when George W Bush was in there because the Republican philosophy is that regulation is unnecessary. The Obama administration is not in the position of being able to replace all these regulators with people who would actually regulate like Elizabeth Warren.
JL thank you for the well written & well said article. It’s about time someone stands alongside the borrowers and discloses to America exactly what is on our mind.
Once again, Thank you. We hope more people, even leaders, for once will represent the consumer :)