BLOG VIEW: ‘Attack Of The Attorneys General,’ read the headline of Servicing Management's page three editorial. That was in September 2008, shortly after the State Foreclosure Prevention Working Group, a multistate coalition led by Iowa AG Tom Miller, released its initial report on servicers' loan modification efforts.
To paraphrase Fergie – something I really hate to do – loan modifications? They're so two thousand and late.
Now that loan modifications have been rolled out en masse in umpteenth different ways (well, principal reductions aside), and servicers have largely moved on to the next logical step in default management – foreclosure – the familiar-sounding ‘multistate coalition led by AG Tom Miller’ has returned – and in a big, big way.
Wednesday's formal announcement that all 50 state AGs are joining forces to investigate the servicing industry had been brewing for some time. As of Wednesday afternoon, details were fairly sketchy.
There's an executive committee that's driving the initiative, and its members include AGs from 12 states and banking regulators from three. The AG offices involved with the committee are not, it should be noted, the most servicing-friendly folks. There's Richard Blumenthal, from Connecticut, who aggressively asked his state's judicial department to freeze all foreclosures for 60 days upon learning that Chase, like GMAC, had allegedly used robo-signers.
There's Bill McCollum, from Florida, who's opened investigations into four law firms accused of being ‘foreclosure mills,’ as well as an investigation into former LPS susbidiary Docx (which, LPS is quick to note, was involved in a doc management snafu unrelated to the current robo-signing saga).
Not to be forgotten, the office of Ohio's Richard Cordray is also in the executive committee lineup. In the past year alone, he's named American Home Mortgage Servicing Inc., Carrington Mortgage Services, HomEq Servicing and GMAC Mortgage in lawsuits.
‘We'd rather not sue everyone, but we will if we have to,’ Cordray said of servicers last September. ‘If we have to sue a dozen of them, then we'll sue a dozen.’
This executive committee will define the course of the multistate group's focus, according to a statement from Miller Wednesday. A spokesperson with Miller's office confirmed to MortgageOrb that the committee will decide which servicers will be subject to inquiry.
Some servicers – those that have already made clear their processes were deficient – are obvious choices. One can pretty safely assume that GMAC will be hearing from the coalition of regulators and AGs.
Miller's spokesperson also implied that the list of servicers will go beyond the five shops that have voluntarily frozen foreclosures in judicial states. Just how deep the list goes is anybody's guess.
The Obama administration is probably all too happy to see this issue stay on the AGs' and state regulators' plates rather than on its own. As The New York Times' Binyamin Appelbaum pointed out Monday, the White House has refused to join the calls of congressional Democrats for a national foreclosure moratorium, and for good reason – it would severely stall whatever recovery is supposed to be happening in the housing market.
Want further evidence that the Obama administration and its brand-spanking-new economics team want to stay as far away from this mess as possible? Even special adviser Elizabeth Warren, perhaps the most outspoken critic of servicers within Obama's inner circle, held back in her dissection of the ongoing affidavit fiasco.
In a live chat hosted by the White House Tuesday, Warren actually acknowledged that the private sector is trying to right itself and suggested the federal government remain hands-off for the time being.
You know things are bad when Warren, introducer of the Consumer Financial Protection Bureau, sides against the federal government's intervening in servicing.
– John Clapp, editor, Servicing Management
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