The former FDIC chairman’s book, “Bull By The Horns,” has several chapters on the housing crisis. She fought hard, according to her account, for something different and better to help damaged borrowers. She can now say that the OCC/Fed “lookback” reviews mandated by April 2011 consent orders are a “ruse and a waste of time and money.”
You can read about how the enforcement agencies – the Department of Justice, HUD and the Attorneys General – and the regulatory agencies – the Fed, OCC, FDIC, and nascent CFPB – cut the baby in half to create the April 2011 consent orders and the April 2012 settlement. You can take a walk down memory lane with the book, since we haven’t heard much about foreclosures, home prices, robo-signing, dual-tracking on mortgage mods, and mortgage servicing screw-ups during the Presidential debates.
Mission accomplished.
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Bair says Treasury Secretary Tim Geithner pitted Bair and Elizabeth Warren, leader of the not yet official at that time CFPB, against each other to make competing proposals for how to compensate homeowners and fix the mortgage servicers. When Warren was widely derided for overstepping her unofficial role and suggesting banks make $25 billion in principal write downs, Geithner never stepped up to explain he had asked for her input.
“Then, with Tim’s blessing, the OCC, DOJ, and state AGs agreed to limit the global settlement discussions to the enforcement agencies (DOJ, HUD, and the AGs) and exclude the regulatory agencies, which of course took the FDIC and CFPB – led by us troublemaking women – out of it.”
Bair says in the book she tried to influence the OCC/Fed “lookback” review process but came up short. She wrote to Geithner on February 7, 2011 suggesting an independent claims commission for foreclosures occurring after January 1, 2008. The independent commission would determine the amount of compensation for damaged borrowers. The OCC, now in charge of drafting consent orders with the Fed to enforce the ‘lookback” reviews, was against this approach.
The OCC/FED consent orders signed in April 2011 fall short, in Bair’s opinion, in three big ways:
No hard metrics that can be used to measure improvement in servicing borrowers legally and efficiently.
Treat all the servicers the same, even though there are huge difference in size and quality of operations.
Allow banks to use well-paid consultants to calculate damages to borrowers and to base the calculations, in many cases, on sampling not a full review of each borrower’s case.
It’s the last point which is has proved to be especially insidious. I agreed with Bair’s assessment of the entire process – it’s a ruse and a waste of time and money – in a recent American Banker BankThink column.
Financial services consultant Promontory and global audit firm PricewaterhouseCoopers are the biggest winners, with seven of the 14 foreclosure review engagements between them. Deloitte is responsible for the behemoth engagement at JPMorgan Chase that includes reviewing mortgages from its former audit clients Bear Stearns and Washington Mutual. Ernst & Young is leading engagements at MetLife and HSBC and assisting Promontory with a big job at Bank of America, where the foreclosures include many mortgages messily underwritten and sloppily serviced by Countrywide.
PwC has reportedly billed more than $50 million for Ally Financial’s Residential Capital since May 2011. The total estimate for that engagement is now at least $250 million. Sources estimate PwC’s total revenue for its four foreclosure review engagements will eventually exceed $1 billion– its largest consulting win ever.
It’s in consultants’ best interests to extend the foreclosure review engagements as long as possible without coming up with an estimate for each servicer of its total liability to borrowers. The big banks don’t want to see that number – they would have to disclose it and few have done any preliminary disclosure of this exposure or even the costs of the reviews. The consulting firms want the megabanks as clients, now and in the future.
Sheila Bair had another chance, before coming out with her book, to change the course of the foreclosure reviews. She balked. Had she already given up the fight before even leaving the FDIC? Was she saving her worst criticisms of the OCC and Tim Geithner for her book?
On June 11, 2011 Bair testified before the full House Committee on Financial Services for a hearing entitled, “Financial Regulatory Reform: The International Context”. Bair had her last great chance to strongly indict the OCC and Fed publicly, on the Congressional record, for refusing to set up a truly independent claims review/validation process and allowing the banks to select their own consultants to calculate the damages.
There was still time. The contracts with the “lookback” consultants were not even signed.
Bair is instead diplomatic and lukewarm in her critique of the planned process during questioning from Representative Maxine Waters (D-CA). She saved her strongest words for the book, which came out more than a year later and much too late to have an impact for damaged borrowers.sblair
The former FDIC chairman’s book, “Bull By The Horns,” has several chapters on the housing crisis. She fought hard, according to her account, for something different and better to help damaged borrowers. She can now say that the OCC/Fed “lookback” reviews mandated by April 2011 consent orders are a “ruse and a waste of time and money.”
You can read about how the enforcement agencies – the Department of Justice, HUD and the Attorneys General – and the regulatory agencies – the Fed, OCC, FDIC, and nascent CFPB – cut the baby in half to create the April 2011 consent orders and the April 2012 settlement. You can take a walk down memory lane with the book, since we haven’t heard much about foreclosures, home prices, robo-signing, dual-tracking on mortgage mods, and mortgage servicing screw-ups during the Presidential debates.
Mission accomplished.
Primary Prosecutors of Mortgage Fraud? Pension Funds And Plaintiffs' Lawyers Francine McKenna Francine McKenna Contributor
PwC Hedges Bet Between Bank of America And Federal Home Loan Banks Francine McKenna Francine McKenna Contributor
Fool Me Twice: Bank of America Plays Hide And Seek Using Fannie Mae Francine McKenna Francine McKenna Contributor
A Sell Signal You Can "Bank" On Francine McKenna Francine McKenna Contributor
Bair says Treasury Secretary Tim Geithner pitted Bair and Elizabeth Warren, leader of the not yet official at that time CFPB, against each other to make competing proposals for how to compensate homeowners and fix the mortgage servicers. When Warren was widely derided for overstepping her unofficial role and suggesting banks make $25 billion in principal write downs, Geithner never stepped up to explain he had asked for her input.
“Then, with Tim’s blessing, the OCC, DOJ, and state AGs agreed to limit the global settlement discussions to the enforcement agencies (DOJ, HUD, and the AGs) and exclude the regulatory agencies, which of course took the FDIC and CFPB – led by us troublemaking women – out of it.”
Bair says in the book she tried to influence the OCC/Fed “lookback” review process but came up short. She wrote to Geithner on February 7, 2011 suggesting an independent claims commission for foreclosures occurring after January 1, 2008. The independent commission would determine the amount of compensation for damaged borrowers. The OCC, now in charge of drafting consent orders with the Fed to enforce the ‘lookback” reviews, was against this approach.
The OCC/FED consent orders signed in April 2011 fall short, in Bair’s opinion, in three big ways:
No hard metrics that can be used to measure improvement in servicing borrowers legally and efficiently.
Treat all the servicers the same, even though there are huge difference in size and quality of operations.
Allow banks to use well-paid consultants to calculate damages to borrowers and to base the calculations, in many cases, on sampling not a full review of each borrower’s case.
It’s the last point which is has proved to be especially insidious. I agreed with Bair’s assessment of the entire process – it’s a ruse and a waste of time and money – in a recent American Banker BankThink column.
Financial services consultant Promontory and global audit firm PricewaterhouseCoopers are the biggest winners, with seven of the 14 foreclosure review engagements between them. Deloitte is responsible for the behemoth engagement at JPMorgan Chase that includes reviewing mortgages from its former audit clients Bear Stearns and Washington Mutual. Ernst & Young is leading engagements at MetLife and HSBC and assisting Promontory with a big job at Bank of America, where the foreclosures include many mortgages messily underwritten and sloppily serviced by Countrywide.
PwC has reportedly billed more than $50 million for Ally Financial’s Residential Capital since May 2011. The total estimate for that engagement is now at least $250 million. Sources estimate PwC’s total revenue for its four foreclosure review engagements will eventually exceed $1 billion– its largest consulting win ever.
It’s in consultants’ best interests to extend the foreclosure review engagements as long as possible without coming up with an estimate for each servicer of its total liability to borrowers. The big banks don’t want to see that number – they would have to disclose it and few have done any preliminary disclosure of this exposure or even the costs of the reviews. The consulting firms want the megabanks as clients, now and in the future.
Sheila Bair had another chance, before coming out with her book, to change the course of the foreclosure reviews. She balked. Had she already given up the fight before even leaving the FDIC? Was she saving her worst criticisms of the OCC and Tim Geithner for her book?
On June 11, 2011 Bair testified before the full House Committee on Financial Services for a hearing entitled, “Financial Regulatory Reform: The International Context”. Bair had her last great chance to strongly indict the OCC and Fed publicly, on the Congressional record, for refusing to set up a truly independent claims review/validation process and allowing the banks to select their own consultants to calculate the damages.
There was still time. The contracts with the “lookback” consultants were not even signed.
Bair is instead diplomatic and lukewarm in her critique of the planned process during questioning from Representative Maxine Waters (D-CA). She saved her strongest words for the book, which came out more than a year later and much too late to have an impact for damaged borrowers.sblair