Robo-Signing And The Kindness Of Strangers


BLOG VIEW: If you were at last week's Mortgage Bankers Association (MBA) Annual Convention, you may have been bewildered by the opening remarks of John Courson, the organization's president and CEO. Courson decided to compare the industry to Charlie Brown, the bumbling yet beloved character of the Peanuts comic strip.

‘We've got a lot of people who, just as we think we're moving down the field, pull the football out from under us,’ he said. ‘A lot of people are looking at us, shouting at us, 'You blockheads!'’

But when Courson's address shifted to discuss the so-called ‘foreclosure-gate’ controversy, he wasn't channeling Charlie Brown's good-natured resignation to obvious shortcomings. Instead, Courson seemed to be channeling the distinctive personality of another iconic fixture of pop culture: Blanche DuBois, the neurotic central character of Tennessee Williams' ‘A Streetcar Named Desire’ who sought comfort and strength by relying on ‘the kindness of strangers.’

In this case, however, Courson was not pleased that the mortgage banking industry found itself facing a decided absence of kind strangers. Courson criticized a ‘feeding frenzy’ from outside sources that fueled the backlash surrounding the robo-signing debacle, arguing that the media were doing a crummy job in getting the truth out.

‘We've seen facts that are inaccurate,’ he said, ‘and information that's coming out that's unrelated to the issue at hand." Courson added that only a ‘very small minority’ of foreclosed homeowners has been negatively affected by robo-signing.

Not unlike Blanche DuBois' difficulty in navigating the shoals between reality and fantasy, Courson's view of the ongoing crisis betrays a new strategy that isn't going to stand very long under careful scrutiny.

For starters, proactive reporters trying to sell newspapers with scandalous stories did not invent the current robo-signing crisis. This new crisis was originated by Jeffrey Stephan, a document processor with the GMAC Mortgage unit of Ally Financial, who admitted in a sworn deposition that he robo-signed up to 10,000 foreclosure documents a month for five years. That adds up to 600,000 foreclosure documents – and you don't need a math degree to recognize that 600,000 does not represent a ‘very small minority’ in any serious consideration of data.

Courson praised the Obama administration for not backing the calls for a national foreclosure moratorium. But that doesn't mean the White House is supportive of the industry. Courson did not mention that the administration instructed the Financial Fraud Enforcement Task Force, the Office of the Comptroller of the Currency and the Federal Housing Finance Agency to investigate the matter. The administration would not go through such extremes simply because of overcooked media coverage. And this doesn't include separate investigations by all 50 state attorneys general, which are acting together in a rare display of solidarity.

If the MBA is having problems attracting the kindness of strangers, it shouldn't be a surprise. Since the financial crisis began, the organization has repeatedly shown an acute inability to acknowledge problems – and lest we forget, rewind to July 2007, when MBA chief economist Doug Duncan informed the audience of a California Mortgage Bankers Association conference that ‘subprime is alive and well’ and that we would ‘see the peak in delinquencies in the next two to four quarters, and the foreclosures peak one to two quarters after delinquencies.’

Courson made matters worse earlier this year when the MBA needed to get out of the lease of its expensive headquarters building in Washington, D.C. – a curious situation, given that Courson was widely quoted in the media with his insistence that distressed homeowners stay in their residences and pay their mortgages. Economist Karen DeCoster, writing for MortgageOrb, facetiously noted the blatant disconnect by stating, ‘Courson advising homeowners on their moral and financial strategies is like a crocodile telling the neighborhood children they should take a shortcut home through the swamp.’

Two weeks ago, I quoted an MBA letter to Capitol Hill that tried to spin the new crisis into an isolated happening ‘in several states’ – in reality, 23 states, roughly half the country – while pointing out that ‘in almost all cases, there are no factual disputes about whether the mortgage is delinquent, the amount of the arrears or whether foreclosure is proper.’

But the MBA is missing the point – insisting that servicers did the right thing even when they were doing the wrong thing (i.e., robo-signing) is nothing short of inane. The core question here is not whether the foreclosures were justified – the problem is that clearly defined procedures were ignored in favor of gut hunches. The emphasis on the justifying the foreclosures while ignoring the shoddy paperwork processing is closer to what Courson bemoaned as ‘information that's coming out that's unrelated to the issue at hand.’

And since I brought up Tennessee Williams earlier, I would like to close with one of his most cogent quotes: ‘A high station in life is earned by the gallantry with which appalling experiences are survived with grace.’ The robo-signing crisis is, by all accounts, an appalling experience – and the industry needs a lot more grace in acknowledging that something went wrong and needs to be addressed.

I sincerely hope that Courson and others within mortgage banking will stop blaming the media, financially strapped homeowners or any other ‘feeding frenzy’ party for this situation. No one is out to ‘get’ the industry – the industry is acting like its own worst enemy when the basic tenets of quality control are ignored or forgotten.

– Phil Hall, editor, Secondary Marketing Executive

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