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November 18, 2010

Foreclosure Fraud Hearings Update: Just 21 Second-Lien Mods in HAMP

Posted in: Uncategorized

Just a sample of the hearings on foreclosure fraud today, now heading into its second panel. You can follow along at this link for the video (which sadly shows almost no members of the committee in the room), or the tweets of Zach Carter:

• Rep. Al Green looked at the second lien issue. As we’ve noted, the banks really don’t want to write down second liens, because that would show up as a near-total loss on their books. The banks own most second liens outright, to the tune of close to $400 billion dollars. And most servicers are owned by the big banks who don’t want to realize these losses. Green says that he has intelligence that the banks have only allowed 21 second lien modifications under HAMP. Out of 495,000 permanent HAMP modifications. That’s absolutely crazy.

• Maxine Waters went into a bravura performance, explaining to the bank regulators step by step what a borrower needs to do to get a modification. The regulators tried to bluff their way through, but they clearly had no idea what a borrower is up against, with all the attendant red tape. This is nothing new for Waters, who has been talking about the problems of homeowners negotiating the system for years. The regulators kept saying they understood the issues, but Waters asked the fundamental question, “If you can understand it, why can’t you do anything about it?”

• Adding to that, Waters got not only the Treasury Department to admit that they’ve levied no penalties on servicers who violate HAMP guidelines, but got the Office of the Comptroller of the Currency to admit they’ve levied no fines, made no cease and desist orders, and threatened no charters of any banks and servicers who have violated the law. In their defense, the acting director of OCC, John Walsh, said that he’s set up a consumer complaint center. “How would anyone know that?” asked Waters.

• The second panel features the top five servicers in America, and the flaks for them are all spinning wildly. They’re claiming that the dual-track system, where the servicers pursue modifications and foreclosures at the same time, has been mandated by the investors, which is a total lie. Waters confronted them with the depositions showing that employees of these servicers admitting that they knowingly broke the law. She also asked about the work of LPS and DocX, calling it “document creation.” Which is what it is; the documents are just created out of thin air. Bank of America said this wasn’t fraud, while the others just wouldn’t answer.

• The Wells Fargo servicer just said their affiliation with major banks, which causes all kinds of conflict of interest, is done out of “customer convenience.” The members of Congress just had their jaws open on that one.

The hearings continue, I’ll try to keep everyone updated…


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