It’s more than “some” Johnny Boy…

It should of been NONE.

From the speech…

The enforcement actions that the federal banking agencies took against the large servicers were intended, in the first instance, to fix the very serious problems we found in foreclosure processing, and in the second to ensure that any borrowers harmed by shoddy practices receive appropriate remedies. The problems we found ranged from the highly-publicized “robo-signing” to the failure of servicers to have required documents at the time they filed foreclosures. But while the compliance collapse was troubling, a potentially more troubling issue was the prospect that some foreclosures should not have taken place at all, because of a bankruptcy filing or protections members of the military are entitled to under the Servicemembers Civil Relief Act.

We began our work by launching an intensive horizontal exam in concert with the Federal Reserve, the FDIC, and the Office of Thrift Supervision, and evaluated a sample of 2,800 foreclosures. Fortunately, we found relatively few cases in which a foreclosure should not have proceeded: although a small number of borrowers were entitled to protection because of a modification in process, bankruptcy filing, or military status, all foreclosed borrowers in the sample were seriously delinquent. And while the sample was small, I don’t expect to see much change in those proportions. Our mortgage metrics project, which captures loan-level data on 63 percent of all first-lien mortgages in the country, found that 94 percent of borrowers foreclosed upon in 2010 were at least six months past due on their payments.

However, we did find very significant compliance weaknesses, and our enforcement actions put into place a program that is intended both to ensure the process is fixed and that any borrower harmed by shoddy practices is compensated. Under our orders, banks will be required to develop a plan to ensure a comprehensive review of past foreclosure actions and to retain an independent consultant to conduct that review and make sure borrowers who suffered financial harm are identified and given an appropriate remedy.
The enforcement actions set out a number of steps that banks must follow to correct those deficiencies, and for those banks, the orders are de facto servicing standards. We think that these orders will ensure that the banks responsible for servicing 68 percent of the nation’s mortgages will be observing standards that ensure that every borrower, particularly those experiencing distress, are receiving every protection they are entitled to under law.

Those standards won’t be easy to meet. One of our large national banks announced it would be hiring up to 3,000 employees to comply with the orders, and another is setting up an additional 28 service centers around the country to help borrowers facing foreclosure. But however expensive and difficult compliance may be, these standards must be met. The processing scandal eroded public confidence not just in the fairness of the foreclosure process, but in the competence of our nation’s banks. It subjected the industry to widespread criticism, including from members of Congress, the media, the judges who hear foreclosure cases, and consumer advocates.

And the legal problems stemming from the foreclosure processing mess are far from over. In all honesty, I can’t recall a case in which so many governmental bodies were engaged in investigating program and legal violations by one industry. In addition to the federal banking agencies, the 50 state Attorneys General, the Department of Justice, the Department of Housing and Urban Development, the Federal Housing Finance Agency and others are all involved.

Full speech below…



Remarks by John Walsh Before the Housing Policy Council