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john gault's Blog

The OCC Abandons the "Independent Foreclosure Review"
by john gault | 2013/01/08 |

The Office of the Comptroller of the Currency has announced it's ending the Independent Foreclosure Review, apparently on the basis it's inconclusive. The OCC left the review in the hands of the banks: how was this "independent"? It wasn't , and as such, I hope it wasn't the polity which had to pay for this show-boat exercise in futility. 

john gault's Blog ::

The Office of the Controller of the Currency has apparently decided to abandon the 'Independent Foreclosure Review".  Well, now there's a mislead if ever there were one.  Given that it was the banks themselves
which controlled and directed the review, there was nothing independent about it.  The OCC has apparently taken the position that at $250.00 an hour for review, it's a colossal waste of money. Under the circumstances, the fox guarding the henhouse, who could disagree? I don't know where they got that 250 figure. An acquaintance of mine does a portion of the audits for a large company and is paid 40.00 per file. She works from her home and no overhead is required by the company for her efforts.   I suppose some attorneys may be involved at the "250 level", though I've yet to meet an attorney who could identify predatory lending if it bit him.    

Today at Forbes, writer Daniel Fisher, commenting on the OCC's decision to end the review, says: 

"This so-called “predatory lending” doesn’t make any economic sense, unless you’re willing to buy the theory that the fees flowing from an ultimately unprofitable loan were enough to induce bankers to destroy 
their own institutions in search of a year-end bonus."

"Destroy their own institutions"? This assumes they knew their acts would  destroy their institutions, which lo and behold, it hasn't. No, we the people got to pick up the tab, something more likely foreseeable to the
bad actors under the too big to fail blanket. Even if the actors could have foreseen the  result of their acts on their own institutions, that's what they did: they plowed right ahead, like a runaway train, stopped by neither the dictates of conscience nor business acumen when in fact making predatory loans and attempting to pawn the inevitable losses on another group. 
It's certainly what FNMA did (notwithstanding FNMA's default-guarantee to the investors). The executives who got those production bonuses did in fact abandon their fiduciaries to FNMA for those fat bonuses. They willfully turned blind eyes to the garbage that was coming in.  I remember hearing it for the first time in 2008 - I just about fell  off my chair, I did. I was literally horrified, and enraged may I add, at such dereliction and greed in what has become the course d'jour these days.  A sad saga indeed.  

FNMA and FHLMC were formed to provide funds for home loans. Someone, and I can see how this idea (shared risk, more or less) was formulated since even I once thought of it in the 80's. Someone(s) decided there should  be a way to further spread the risk of defaults on these home loans and 
maybe that would have in fact created a viable investment opportunity for pension funds, etc.  
But it's undeniable that the plan hasn't worked and it's also undeniable that both corporate and individual (mucks' bonuses do in fact come to mind) greed was at the heart of the failure. The bankruptcy remoteness for one thing, ultimately for the benefit of the securitization trusts, complicated the matter by requiring multiple transfers before the loans were to find their resting places in the trusts.  
The multiple transfers on such volume, volume fueled by reduced underwriting standards ,inflated appraisals, and in some cases plain abandonment of those standards, proved  to be too much of a challenge. 
That's on a good day. Now throw in the greed Mr. Fisher appears to want to deny: the parties involved cut corners and did not create the appropriate paper trail, here short for transfer and delivery, which would legitimately establish entitlement to enforce the contracts.  

These aren't just any contracts - they'are contracts involving provisions of the UCC and the Statute of Frauds / real property laws.  Enter MERS, whose attempt to save some time on recordations of assignments of collateral  instruments nonetheless - at best - left the UCC requirements for transfers of notes 
solidly in place.
Some people believe the participants said "hey, we'll just fund the loans with the Pensioners' money". I can't speak to that, although it has a certain ring of truth, but one way or another, forensic accounting is called for here to determine parties' rights. I would venture the next few years will find an onslaught of overdue e-discovery in that regard.   

These loans are contracts and subject to all available defenses, just like any others. To say a party showing up with no interest for its own failure to either follow the rules or take action to protect its own interest but 
demanding recourse as if it did because we owe SOMEone is not fraud is absurd and a great insult to all Americans and the law. The party who messed up whether by design or negligence is the one who is legally required to bear any loss. That's a fact and it's one the judiciary routinely overlooks when coming from "you're not getting a free house". And as I've asked before, would it be so bad, especially given the state of our economy, if the party to benefit from another's malfeasance and misfeasance were the 
homeowner? 
In his article, Mr. Fisher asks, "Has there been a single case in the past five years of a homeowner who was current on his mortgage being foreclosed through fraud?" First of all, yes there has. But more importantly, what's default got to do with anything? Nothing. Default doesn't determine the rights of parties.If it did, you or I could start a used car business with all the cars with payments in default we could get our hands on. Equity, even if it could stand in place of the UCC and land laws,  is a consideration to be extended to those with clean hands and only those with clean hands.  

It appears at least Mr. Fisher is espousing a view that it's a victimless crime when one with a bigger stick may deprive another of his home on some theory that the homeowner has it coming.   

What's going on is far from victimless.  What's at stake is who we are. 




    



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