“You might ask why any industry with this kind of performance record would be allowed to stay in business. It would be a good question.”
The foreclosure fraud settlement has been filed in federal court in Washington. The Justice Department has provided the relevant documents, over a month after the settlement was announced. So now we can finally begin to assess the settlement and what it will mean for housing policy.
It’s going to take a while. The documents are long and the rules dense. I don’t expect to get a handle on it for the next several days. But we can make some quick points.
First of all, as we’ve been documenting, these are larger releases from liability than at first contemplated. It’s not just a “robo-signing” settlement. Among the elements released in the settlement include foreclosure fraud, numerous instances of varied servicer abuse, violations of the Servicemembers Civil Relief Act, whistleblower claims of fraud in HAMP, origination errors, false documentation in court, violations of the False Claims Act, appraisal fraud at Countrywide, fair lending violations, underwriting inaccuracies on FHA loans, and more. Here’s just one list from the complaint of servicing abuses found by the government:
a. failing to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements;
b. charging excessive or improper fees for default-related services;
c. failing to properly oversee third party vendors involved in servicing activities on behalf of the Banks;
d. imposing force-placed insurance without properly notifying the borrowers and when borrowers already had adequate coverage;
e. providing borrowers false or misleading information in response to borrower complaints; and
f. failing to maintain appropriate staffing, training, and quality control systems.
This is one portion of what is being released in the settlement. And here’s another list on loan modification noncompliance (which in the case of FHA and other loans, is mandatory):
Be sure to check out the rest of this one here…