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The Federal Reserve Terminates Anemic Enforcement Actions Allowing Fraudulent Foreclosure Practices to Continue

Posted by Neil Garfield | January 12, 2018

The Federal Reserve is wrapping up its ineffective sanctions against the five U.S. banks who were accused of improper handling of post‐crisis mortgage foreclosures. On Friday, the Federal Reserve Board announced another $35.1 million in civil penalties against five banks as part of its effort to terminate enforcement actions, issued in 2011 and 2012, against a total of 10 banks related to residential mortgage loan servicing and foreclosure processing.

The enforcement case has been ongoing for seven years. New penalties include $14 million for Goldman Sachs, $8 million for Morgan Stanley, $4.4 million for U.S. Bancorp, $3.5 million for PNC Financial Services Group Inc and $5.2 million for CIT Group Inc., which had purchased OneWest Bank — the firm that bought IndyMac. Despite the fact that the fines and sanctions have done nothing to curtail the fraudulent practices, the Fed is ending the program.

From the statement:

"When it issued the mortgage servicing enforcement actions, the Board announced that it believed monetary penalties were appropriate for all firms subject to the actions for their mortgage servicing deficiencies The Board previously assessed penalties against the other firms under mortgage servicing enforcement actions. With the penalties announced today, the Board has now assessed penalties totaling approximately $1.1 billion against all Federal Reserve supervised firms under mortgage servicing enforcement actions."

With the swamp creatures in control of the Fed under Trump including Mnuchin who was chairman of OneWest and Comptroller of the Currency Joseph Otting who was its chief executive officer when the firm faced earlier foreclosure sanctions- is it any surprise that the Federal Reserve is disinterested in pursuing the ongoing fraud?

The Fed had previously fined other banks, including Bank of America Corp., JPMorgan Chase & Co., Ally Financial Inc., Suntrust Banks Inc. and HSBC Holdings Plc.

Illegal Foreclosures

After the mega-banks were accused of filing thousands of defective foreclosures in 2011, the Fed and other regulators mandated that lenders fix residential mortgage servicing and foreclosure issues. The Fed's termination of the earlier enforcement actions means the regulator is satisfied that the firms have improved their practices, the agency said.

IndyMac Bancorp failed in 2008 as one of the mortgage meltdown's major casualties. That same year, Mnuchin, a former Goldman Sachs banker, led a group of investors that included hedge fund billionaire John Paulson and finance giant George Soros in buying the bank.

IndyMac's name was changed to OneWest and Mnuchin hired Otting, a veteran West Coast banker, to run it. The firm — beset by the foreclosure scrutiny — was sold off to CIT in 2015, and Mnuchin and Otting joined the Trump administration last year.

The 2011 actions from the Fed, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. were among the largest coordinated enforcement efforts in the years following the crisis but failed to implement any true protections for homeowners. The financial penalties assessed provided no benefit to homeowners who were wrongfully foreclosed on.

Ineffective Effort

The regulators first created the Independent Foreclosure Review in which the largest U.S. mortgage firms were ordered to go through thousands of foreclosures looking for errors and rectify the problems, but the agencies decided that effort was overly time-consuming and ineffective (of course they did).

In 2013 they decided to fine the banks hundreds of millions of dollars and ordered them to pay out about $3.6 billion in cash to compensate borrowers. There is no evidence this has been done, and many servicers continue to have problems complying with orders to fix their internal systems and predatory practices.

The OCC's bank settlements were completed a year ago, including fines of $70 million for Wells Fargo & Co. and $48 million for JPMorgan after the two were accused of failing to move fast enough to satisfy the earlier orders. There has been no accounting where the $70 million has gone and it has not benefited homeowners.

By 2014, the Fed was faulted by its watchdog organization for its substandard handling of complex settlements. Its Office of Inspector General said poor preparation and management led to poor execution of the settlement with the mortgage servicers.

Additionally, the Board announced the termination of a supplemental agreement with Ally, issued in 2012 after Ally’s mortgage servicing subsidiaries sought out bankruptcy protection, which addressed the parent company’s contingent obligations under the 2011 enforcement action against Ally. According to the Fed, this agreement is no longer necessary after the termination of the 2011 action.

The Fed also announced the termination of enforcement actions issued against two servicers, Lender Processing Services, succeeded by ServiceLink, and against MERSCORP. bbBoth companies faced enforcement actions tied to foreclosure-related services. If this isn’t a “get-out-of-Jail” free card for all the bad-players, and permission to continue fraudulent foreclosures, loan modification fraud, and continue to fabricate and forge documents‐ then what is?

 

 

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