The bipartisan group of Attorneys General that is attempting to negotiate a settlement with the nation’s biggest banks over the foreclosure fraud scandal (in conjunction with the Justice Department and other federal agencies) has run into a slew of roadblocks. First, a group of eight Republican AG’s has broken with the group and criticized the idea that the banks should face monetary penalties. Some federal regulatory agencies, including the notoriously bank-friendly Office of the Comptroller of the Currency, have also split away and come to their own settlement with the banks.
As CAP Housing Policy Adviser Alon Cohen explained, the settlement that the regulators forged with the banks is a weak one. Adding insult to injury, one facet of the settlement required the banks to hire outside parties to conduct reviews of their past behavior, but the regulators have agreed to not make those reviews public:
When mortgage servicers signed consent orders with the Office of the Comptroller of the Currency and the Federal Reserve, these companies were required to hire outside firms to conduct “look back” evaluations of questionable foreclosure practices. But these reviews will not be made public, according to an OCC spokesman.
Major servicing arms at Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, Ally Financial and others agreed to the enforcement actions taken in April as a result of mishandled foreclosures still being corrected.
So the banks not only get to pick and choose who they want to conduct these reviews, but the findings will never see the light of day. As FDIC Chair Sheila Bair noted, there is huge potential for conflict-of-interest, as these reviewers “may have other business with [banks] or future business they would like to do with them.” “This is a huge issue,” she said.
For some hint into what these reviews could potentially turn up, the Huffington Post’s Shahien Nasiripour reported that the Department of Housing and Urban Development’s inspector general found the nation’s biggest banks were potentially “defrauding taxpayers in their handling of foreclosures on homes purchased with government-backed loans.” But instead of having to undergo a thorough investigation — and face the music if more misdeeds are uncovered — the banks will be able to pick their own reviewers, those reviews will be stamped by an agency that is extremely cozy with the banks, and then the public will never see the results.
Hopefully, this defection doesn’t deter the AG’s from continuing their investigation and ultimately winning homeowners some relief from bank misdeeds. (Cohen has some good ideas for how to apply monetary penalties to help homeowners here.) But with regulators and Republicans undermining the AG’s on all sides, that task is getting harder.