The OCC's "hard bargain" is yet another sweetheart deal for the banks. The first one, you may recall, was made back in 2003 when the OCC used its federal preemptive power to block states from enacting laws that would have stopped banks from earning record profits from the predatory subprime loans that caused the mortgage markets to overheat and the economy to crash.
A decade later, millions of families who have lost their homes or who remain mired in the foreclosure process are well aware of the mess the OCC helped to create. It remains a daily nightmare. And after raising hopes that some defrauded homeowners may finally see justice, the agency's bungled investigation and rushed settlement only managed to twist the knife deeper. Simply put, it's a travesty and still, no one goes to jail.
The same week that Comptroller's Office was busy committing this epic fail for American consumers, another agency scored what could well be an epic win.
The Consumer Financial Protection Bureau issued new rules last week clamping down on mortgage servicer abuses. It's a work in progress, but nonetheless it is real progress.
Instead of rushing to court on the first late payment, servicers must now wait four months after a loan goes delinquent before filing a foreclosure proceeding. Also banned: Dual tracking, in which servicers try to modify and foreclose upon the same mortgage at the same time.
Now, the CFPB will require that servicers do a better job communicating with borrowers, as well, so that informing them about other ways to save their homes will now be part of the job. And servicers can no longer use tricks such as "lost" payments and computer errors to reap the fees associated with pushing people into unnecessary foreclosure. They are accountable to the CFPB.
The bureau even will force banks to maintain accurate records that are easily accessible by borrowers, forcing the companies to clean up the paperwork debacle that was the most immediate cause of the robo-signing scandal.
"For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround. In too many cases, it has led to unnecessary foreclosures," the bureau's director, Richard Cordray, said when the rules were made public. "Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes."
The bureau's new rules balance the ballast on a badly listing ship, putting the "service" back in the mortgage servicing industry. The big banks that own the servicers have resolutely refused to do it. And for the last decade, the Comptroller's Office has proven to be so thoroughly overwhelmed by the industry it is charged with regulating that it can't even run a proper investigation when its own reputation is on the line.
Our government fell down last week. Then it got back up. While the bad news is that millions of people who've already been hurt by messy and fraudulent mortgage servicers may only receive a fraction of the justice they deserve, the good news is that for generations of consumers to come, mortgage servicers will be there to serve them, not the other way around.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.