There were some notable differences between the two forums. The House group overall was less well prepared; I’m told that’s due to the fact that Representatives have far fewer policy staffers than Senators. There was also a higher proportion of participating members predisposed towards banks in the House hearings. Nevertheless, the sessions made a major dent in some key bank talking points, the biggest being their assertion that all of the foreclosures made are warranted, and therefore the foreclosure problems are mere paperwork issues.
Some exchanges were effective. Maxine Waters, who chaired the session, grilled the regulators on whether they had fined or imposed sanctions on any banks. She was forced to become prosecutorial when every single regulator present refused to provide simple a simple yes/no answer as requested. One of the less evasive interactions was with OCC acting chairman John Walsh:
Waters: Has OCC taken any enforcement action?
Walsh: We have certainly issued supervisory requirements on matters requiring….
Waters: Have you levied any fines?
Walsh: I do not believe that we have.
Waters: Have you issued any .. orders?
Walsh: I don’t believe there have been any public actions.
Waters: Have you threatened to revoke any charters?
Walsh: No.
Waters: Do you think the servicers really believe you mean business if they don’t fear consequences?
Walsh: I think the consequences are clear and ….
Waters: But you haven’t done that. You haven’t done any of that. Why should they take you seriously?
The banks did not comport themselves terribly well in either hearing. It’s remarkable to see how they all tell the same lies hew to the same talking points: we do everything we can to avoid foreclosures, we don’t benefit from them (huh?), our second mortgage portfolios have no impact on our decisions (!?!), the only people we foreclose on are people who are delinquent. Chase adds some insulting-to-intelligence bromides about treating customers with respect. When told that there have been all sorts of people who have been foreclosed upon who don’t fit their tidy story (victims of compounding and often erroneous servicer junk fees, or told by the servicer not to pay so as to qualify for a mod), the next line of defense is to characterize them as errors, apologize, and profess that they fix mistakes as soon as they become aware of them.
Sadly, when Waters put up the notorious DocX document fabrication price list, all the bank representatives cheerfully piped up: “We don’t use DocX.” Of course they don’t now; DocX was shut down in early 2010. But she did score one when she asked banks to say which investors objected to mortgage modifications and the Bank of America witness ‘fessed up that it was very few.
It was also remarkable to how tightly the bank representatives had been scripted. They were utterly incapable of responding to unanticipated questions. Georgetown law professor Adam Levitin, who was extremely effective in both hearings, was stunned at how tongue-tied they were when Brad Miller asked about why big banks should be in the servicing business:
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