Now we know what that plea by Goldman Sachs to “end robo-signing” was all about. It wasn’t just the New York banking regulator, but the Federal Reserve which sanctioned Goldman over their foreclosure practices today.
The Federal Reserve on Thursday sanctioned Goldman Sachs GS -3.08% over deficient practices involving residential mortgage loan servicing and foreclosure processing at its former subsidiary, Litton Loan Servicing LP, in what’s commonly referred to as the “robo-signing” scandal. The action orders Goldman Sachs to retain an independent consultant to review foreclosure proceedings initiated by Litton that were pending at any time in 2009 or 2010 and provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified. The Fed added that monetary sanctions are “appropriate” and that it will announce them later.
Here’s the press release, if you’re interested. So this is pretty much the same as those consent orders from OCC – it tells Goldman to hire their own consultant to determine damages. Why Goldman? Because they weren’t included in the other OCC consent orders. So this is as toothless and unimportant as those previous orders. And anyway, Goldman doesn’t even own Litton Loans anymore, so why they have to hire the consultant is unclear.
Moreover, the banks are going to keep robo-signing because they have to keep robo-signing. The cost of whatever the consultant the banks hire says they have to pay is surely less than the cost of admitting that they broke the housing market.
This does show that the Fed is probably not all that optimistic about a 50-state settlement with leading banks over foreclosure fraud, if they’re continuing to do their own consent orders.
Of slightly more interest is what Fed governor Elizabeth Duke had to say today at a housing event. Duke is one of the remaining Republican appointments on the Fed board of governors:
Federal Reserve governor Elizabeth Duke on Thursday suggested that the government could help more homeowners refinance their mortgages, as Obama administration and Fed officials study ways to boost the flagging U.S. housing market.
With mortgage rates hovering near the lowest levels in decades, many Americans have not been able to refinance their home loans. Economists say allowing more borrowers to do so would put more cash in Americans’ pockets and provide a boost to the broader economy.
We know that a mass-refinancing scheme may be part of the Administration’s stimulus programs, but it would have to get past Ed DeMarco of the FHFA, in order for the government to implement it for Fannie- and Freddie-backed loans.