VIA: HuffPolitics

Senator Carl Levin (D-MI) and former Goldman Sachs Mortgages Department head Daniel Sparks, Senate Governmental Affairs Subcommittee on Investigations hearing, April 27, 2010

Dylan Ratigan with special guest New York Times’ Louise Story, discussing the 600+ page report uncovering Goldman Sachs scheme to defraud investors. According to Bloomberg, The U.S. Justice Department and regulators will have to determine whether employees and executives of Goldman Sachs Group Inc. violated any laws when they traded securities tied to the housing market and testified to Congress about the transactions, Senator Carl Levin said.

Prashant Gopal- Bloomberg

While the attorneys general proposed many similar terms last month, banking regulators didn’t include any requirements for lowering mortgage debt. That may hinder Iowa Attorney General Thomas J. Miller as he leads a group of state officials working with the administration to require lenders to evaluate loan cuts for some borrowers whose homes are worth less than their mortgages.

“I have always been pretty skeptical about the ability of principal reductions to get you much,” said Mark A. Calabria, director of financial-regulation studies at the Cato Institute, a public-policy research group in Washington. “I think we will look back and say this was the death knell.”

Question: Wonder what the regulators thought of when they watched 60 Minutes broadcast of LPS, DOCX and Servicer fraud on national tv with over 12 million viewers?

Just see what the number one popular post has been on this site since the airing of it or do a simple google search like 60 Minutes Docx or 60 Minutes LPS and you’ll see SFF is the first site that comes up. We’re no fools and believe me the entire globe has tuned in, including the regulators.

Shahien Nasiripour– Huffington Post

The nation’s 14 largest mortgage firms must compensate wronged homeowners after federal bank regulators determined the companies broke federal and state laws by improperly foreclosing on an incalculable number of distressed borrowers. The agencies announced such penalties Wednesday, the first in what is likely to be a series of enforcement actions targeting the country’s biggest banks and costing them billions.

Lenders like Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial systematically broke rules and took shortcuts when foreclosing on homeowners last year, the regulators said. Their three-month review launched after documents and videos of so-called robo-signers — people who signed thousands of foreclosure documents a day without reading them or knowing what was in them — surfaced, leading the biggest banks to halt home seizures.

Bank examiners found the firms employed practices that “failed to conform to state legal requirements.” In other words, they broke the law.

BLOOMBERG

The 14 largest U.S. mortgage servicers must pay back homeowners for losses from foreclosures or loans that were mishandled in the wake of the housing collapse, according to a consent decree released today.

The agreement between the servicers and U.S. regulators imposes more substantial penalties than early reports of the deal indicated. It could also help the U.S. Justice Department determine the size and scope of any future fines for the flawed practices, regulators said.

Hear No Evil, See No Evil, Speak No Evil

The banks didn’t admit or deny regulators’ findings, according to the orders.

From Fed Press Release:

The Federal Reserve will closely monitor progress at the firms in addressing these matters and will take additional enforcement actions as needed.

In addition to the actions against the banking organizations, the Federal Reserve on Wednesday announced formal enforcement actions against Lender Processing Services, Inc. (LPS), a domestic provider of default-management services and other services related to foreclosures, and against MERSCORP, Inc. (MERS), which provides services related to tracking and registering residential mortgage ownership and servicing, acts as mortgagee of record on behalf of lenders and servicers, and initiates foreclosure actions. These actions address significant compliance failures and unsafe and unsound practices at LPS and its subsidiaries, and at MERS and its subsidiary. The action requires LPS to address deficient practices related primarily to the document execution services that LPS, through its subsidiaries DocX, LLC, and LPS Default Solutions, Inc., provided to servicers in connection with foreclosures. MERS is required to address significant weaknesses in, among other things, oversight, management supervision, and corporate governance. The LPS action is being taken jointly with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, while the MERS action is being taken jointly with those agencies and the Federal Housing Finance Agency.

The Federal Reserve Board based its enforcement actions on the findings of the interagency reviews of the major mortgage servicers, LPS, and MERS. A summary of the findings from the reviews of the mortgage servicers is available in the Interagency Review of Foreclosure Policies and Practices, which is simultaneously being released by the Federal Reserve Board and the other agencies.

• Interagency Review of Foreclosure Policies and Practices (461 KB PDF)
• Consent Order for Bank of America Corp. (34 KB PDF)
• Consent Order for Citigroup Inc. and CitiFinancial Credit Co. (28 KB PDF)
• Consent Order for Ally Financial, Inc., ResCap, GMAC Mortgage, and Ally Bank (87 KB PDF)
• Consent Order for HSBC North America Holdings, Inc. and HSBC Finance Corp. (76 KB PDF)
• Consent Order for JPMorgan Chase & Co. and EMC Mtge. (39 KB PDF)
• Consent Order for MetLife, Inc. (25 KB PDF)
• Consent Order for PNC Financial Svs. Group, Inc. (25 KB PDF)
• Consent Order for SunTrust Banks, Inc., SunTrust Bank, and SunTrust Mortgage (76 KB PDF)
• Consent Order for U.S. Bancorp (25 KB PDF)
• Consent Order for Wells Fargo & Co. (25 KB PDF)
• Consent Order for LPS (47 KB PDF)
• Consent Order for MERS (48 KB PDF)

Credit Slips.org

The rule of law is not even worth 20 basis points.  That’s the ultimate message in a recent paper by Charles Calomiris, Eric Higgins, and Joseph Mason evaluating the proposed AG mortgage servicing settlement. Calomiris et al. estimate that the settlement will raise mortgage costs at least 20bps, and they think that’s too much.

Recognize what they’re really saying:  that 20-45bps is too high a price to pay for the rule of law. They value the rule of law at less than 20bps. At present conversion rates, that’s about 30 shekels of silver.

The whole Calomiris et al. document is rather strange, as it’s hard to do any serious evaluation of the settlement without knowing the terms. We’ve seen a proposed servicing standards term sheet from the AGs and we’ve seen a CFPB analysis of disgorgement of wrongful profits and the costs of potential principal reductions, but it’s way premature to attempt any sort of real evaluation of a settlement. Unless, of course, the goal is not a serious evaluation of a settlement, but an attempt to forestall a settlement. Which is what this paper is.

Full Disclosure:

Funding for this research was provided in part by the financial services industry, including entities affected by the proposed settlement.

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The Economics of the Proposed Mortgage Servicer Settlement

Charles W. Calomiris, Eric J. Higgins, and Joseph R. Mason1

[ipaper docId=52894340 access_key=key-bxx3cj688ghgdck8kt8 height=600 width=600 /]

It’s going to get really interesting to see how this all plays out with the AG’s role.

According to the New York Times, the the servicers, which violated state and local laws and regulations governing foreclosures, are agreeing to improve their methods in numerous ways. They will be required to have more layers of oversight and proper training of their foreclosure staff. The oversight will extend to third party groups, including the law firms that do much of the actual work of eviction.

[…]

The investigators reviewed the policies and procedures, structure and staffing of the top servicers, as well as their use of law firms and other third parties. They examined 2,800 foreclosures in various stages.

The banks examined were Bank of America, Citibank, GMAC, JPMorgan Chase, Wells Fargo and nine others. The examination found critical deficiencies and shortcomings in foreclosure preparation and oversight, resulting in violations of state and local foreclosure laws, regulations and rules.

The servicers will probably be assessed fines at a later point.

via: Credit Slips

Draft Uniform Servicing Standards

[ipaper docId=52067940 access_key=key-1h4x2rylxqp4qcg8bpqr height=600 width=600 /]