WAPO – Regulators Flawed in Foreclosure Oversight

Regulators flawed in foreclosure oversight

Washington Post Staff Writer
Monday, November 8, 2010; 12:02 AM

As foreclosures began to mount across the country three years ago, a group of state bank regulators suspected that some borrowers might be losing their homes unnecessarily. So the state officials asked the biggest national banks for details about their foreclosure operations.

When two banks – J.P. Morgan Chase and Wells Fargo – declined to cooperate, the state officials asked the banks’ federal regulator for help, according to a letter they sent. But the Office of the Comptroller of the Currency, which oversees national banks, denied the states’ request, saying the firms should answer only to inquiries from federal officials. In a response to state officials, John Dugan, comptroller at the time, wrote that his agency was already planning to collect foreclosure information and that any additional monitoring risked “confusing matters.”

But even as it closed the door on state oversight, the OCC chose itself not to scrutinize the foreclosure operations of the largest national banks, forgoing any examination of their procedures and paperwork. Instead, the agency relied on the banks’ in-house assessments. These provided no hint of the problems to come until they had tripped the nation’s housing market, agency officials later acknowledged.

“Based on what we were seeing and what we were concerned about, it felt like a chronic underreaction at the federal level,” said John Ryan, a senior official with the Conference of State Bank Supervisors.

Even when the mortgage industry itself identified possible flaws in foreclosure paperwork, the agency was slow to act. In September, Ally Financial suspended foreclosures after discovering problems with tens of thousands of cases. But even then, the OCC did not begin to examine the operations of other major banks. Instead, the agency asked them to undertake internal reviews and told them it would conduct its own examination later, an OCC official said.

Over the following weeks, most of the major national banks announced one after the next that they were reviewing their foreclosure practices and putting thousands of cases temporarily on hold. While the freeze offered new hope to thousands of distressed borrowers, it also threatened to undermine the real estate market, which was already struggling to recover from crisis.

Two weeks ago, for the first time, the OCC began sending its staff into the banks to examine their foreclosure operations, interview bank employees and review paperwork.

The OCC is one of the nation’s four federal bank regulators and has primary oversight over the largest banks, while the other three – the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision – share responsibility for many small and medium-size financial firms. All the agencies failed to spot problems in the foreclosure process.

The OCC’s recent initiative is part of a broad federal effort to assess the U.S. foreclosure breakdown. Regulators said they hope to complete a preliminary report this month but have not decided whether it will be made public.

In monitoring the financial health of banks over the years, the OCC had been far more aggressive. Agency staff members have been assigned to work full time inside the largest banks, checking to see whether the banks are taking excessive risks, for instance, by analyzing their holdings.

But the agency did not look closely at how banks foreclose when borrowers don’t make their mortgage payments. OCC officials treated foreclosures as the simple act of filing documents to seize ownership of a home once a borrower couldn’t pay.

“We looked at the final stage of the process and thought of it as one that would be governed by standards and procedures in internal controls,” said Julie Williams, the OCC’s top lawyer. “You would only be able to know for sure if there was a problem with the document-signing process if you were standing in the room watching someone sign documents. That is not traditionally part of the bank examination process.”

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I sure could use some…

5 Responses to “WAPO – Regulators Flawed in Foreclosure Oversight”
  1. Whippy FLoggman says:

    If you don’t live in NY,or OHIO, AND your looking for state or Federal intervention, then your basically screwed to the extent you believe a bureaucrat is going to help you.

    What you have to hope happens is incompetent JUDGES finally get it.

  2. Flex says:

    There you go! Another one bites the dust. Here is another loser who chose not to do anything knowing the banks were doing wrong all along for so many years back before the financial crisis hit. How can these people be humans and sleep at night that many innocent people will lose their homes, their children, their families, and everything that comes with being part of this life on this planet?
    How in the world an OCC regulator does not know what to look for in a procedure for the banks to foreclose on people’s homes? How can they just think it is a standard procedure that if the homeowner fails behind with the mortgage payment, the banks has all the right to foreclose? Why do we have laws in place if we don’t use them and apply them?
    Where did these people go to school and what do they learn, and better yet, what skills do they have to be hired as regulators for the OCC? The way I see it, even the OCC needs to be regulated. They need to be supervised and audited every 3 months to make sure they are up to date with updates, training, and knowledge of what to look for and how to handle the wrong doing from the banks.
    How a new regulator know what to look for in a document if they don’t even know what the banks did?
    I would like to interview an OCC regulator and ask questions about Securitization, MERS, PSA, CDS, CDO, REMIC, and a little bit of history of the Federal Reserve and Wall St. I bet that many of them wouldn’t know what I am talking about.
    Is there anything else that we need to discover everyday from all this madness called financial crisis?
    Would we ever get to the bottom of this mess or shall we wait for Ron Paul run for President and audit the Federal Reserve? How are you liking the new bail out of $600 Billion Dollars America? Do you need some change for the holidays?
    How much would you like to bet that you will not get a dime of this new money?
    Keep up the shopping spree and you will see inflation coming right at your face and hit you like a brick. How would you like to pay more than $5 dollars for a loft of bread and $5 dollars for a gallon of milk, and even $5 dollars for a gallon of gas? Do you really want to know what is going to be more expensive of all? How about food and water? Without water we can not live and we can grow fruits and vegetables. Without water we can not shower, go to work, and be pleasant to other people. Have you ever been without water for more than 3 days?
    You don’t know what you are missing until you don’t have it anymore.
    These figures that I threw in are just as realistic as it is today. Just wait a few months and you will see the real figures, inflation is around the corner for all of us and there is nothing we can do about it.
    Let’s ask Mr. Rokeffeller why did he select Obama to be the next President.
    Have you notice the changes yet? We had a lot of changes, but not the ones that were promised in the campaing.
    We should all pray for Obama tonight and everyday for the rest of his term. Trust me we are going to need God to touch his heart and his soul to make him a better man and the President we all hope for him to be.
    God Bless You, your family, and America.

  3. l vent says:

    What the hell is Obama doing in India right now while this country is self-destructing. He needs to get is butt back home and start trying to do something in this country. He is getting to be more disgraceful everyday. He needs to stop doing the JIG over in India because the JIG is up over here in this country. HE CAN BEGIN BY PLACING A NATIONWIDE MORATORIUM ON ALL FORECLOSURES. FEDERAL CRIMES ( SECURITIES FRAUD) HAVE BEEN COMMITTED IN THE LOANS OF PEOPLE WHO’S HO– USES ARE BEING STOLEN RIGHT FROM UNDER THEM. MOST OF THESE BANKS ARE UNDER FEDERAL INVESTIGATION AND IF THEY ARE NOT THEY SHOULD BE BY NOW. CUT THE B.S. OBAMA, NOBODY BELIEVES IT ANYMORE AND WE ARE FED UP WITH YOU IGNORING THE TRUE FACTS UNDERNEATH ALL OF THE FORECLOSUREGATE FRAUD!!!!!!

  4. l vent says:

    Just a thought about the HAMP debacle. Maybe the lenders could not give loan mods on the backs of an unsecuritized debt or they would have been committing yet another act of fraud, GOD FORBID!! I am sure if they could have gotten away with it theywould have snuck that one under the radar, too. So glad I never got one,now.

  5. l vent says:


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