US Treasury attempts to Silence Consumer CFPB Complaints

Treasury Report Recommends Keeping Data From Consumers

Jun 14, 2017

An agency created to protect the interests of American consumers may be gutted by the Trump administration’s pursuits to cut back federal regulations.

The Consumer Financial Protection Bureau, which was created by the Dodd-Frank measures to hold financial institutions accountable for customer grievances about their products, is the latest reform to come under scrutiny.

Conservatives target the CFPB along with other Dodd-Frank regulations in the Financial CHOICE Act, which passed the House of Representatives on Thursday. The bill would prohibit the CFPB from publishing data — which can currently be found here — about the complaints it receives, meaning that consumers would have less information when making financial decisions.

The Treasury department released a report Monday that recommends keeping this data from the public, citing that only government authorities should have access to the information.

Companies have long claimed the bureau is overreaching. The Treasury backed up this viewpoint in the report, saying the CFPB “subjects companies to unwarranted reputational [sic] risks.”

Consumer advocates agree that the current database should delineate more clearly between complaints that have been investigated and false accusations, but also make the argument that the bureau should disclose even more data.

The bureau has processed nearly 800,000 complaints since its inception, according to CFPB records. As a result, the watchdog has been responsible for $11.8 billion dollars in returns to 29 million U.S. consumers, which breaks down to an average $407 returned to the 9% of the U.S. population affected. This back-of-the-napkin math assumes no customer was a victim in more than one case.

Complaints submitted to the CFPB played a role in resolving misconduct at Wells Fargo, Bank of America, and PayPal. The bureau has also targeted unfair student loan practices and predatory payday lending.

The agency gives consumers a cost-free avenue to hold large companies accountable, making it possible to correct issues that would have been ignored or addressed only by parties that could afford expensive court proceedings. The CFPB also provides data and research to help Americans make informed financial decisions.

“This report calls for radical changes that would make it easier for big banks to cheat their customers and spark another financial meltdown,” Sen. Elizabeth Warren, who worked to ensure the consumer protection measures were included in the 2010 Dodd-Frank reforms when she was a Harvard Law School Professor and congressional advisor.

The CHOICE act has virtually no chance to pass the Senate, but the debate about the CFPB will likely continue.

A court decision in October of last year declared the structure of the CFPB unconstitutional due to the unusual amount of power vested in a single director of the organization. Unlike other independent agencies, which typically report to a commission, the bureau was accountable only to the director. Rather than shutter the agency, the DC Court of Appeals ruled the president should have the power to dismiss the director at will.

The Department of Justice filed an amicus brief in March arguing that the president should have this authority ahead of the hearing to re-examine the October ruling. Oral arguments were held May 24th in front the Federal Court of Appeals for the D.C. Circuit, but a decision likely won’t be handed down until late summer or early fall 2017.

The DOJ brief and the recent Treasury report showed that the Trump administration is firmly siding with Republicans in Congress on this issue. And Treasury Secretary Steve Mnuchin has said the CFPB should be funded by Congress, rather than the Federal Reserve.

“It may not survive the way we know it through this administration,” consumer attorney Deepak Gupta, who worked at the CFPB in its early days, said of the agency in November.

BOA Seeks to Seal Damaging Testimony from Urban Lending

HAPPY INDEPENDENCE DAY!

WHY ARE THE BANKS FIGHTING TO GET AS LITTLE AS POSSIBLE FROM EACH “FAILED” LOAN?

A drama is playing out in the state of Massachusetts. Bank of America is pretending to be the lender or the authorized servicer or both. But it outsourced the task of dealing with borrowers seeking modification. The company that was used is Urban Lending Solutions (ULS).  A deposition was taken from a knowledgeable source from within ULS.  The attorney  taking the deposition was merely looking for evidence of a script prepared by Bank of America that ULS employees were to follow. Not only was the script uncovered but considerable other evidence suggested institutional policies at Bank of America that were in direct conflict with the requirements of law, and in direct violation of the settlements with the Department of Justice and the banking regulators.

The transcript of the deposition was sealed at the request of Bank of America, which the borrower did not interpose any objection. Now there are a lot of people who want to see that deposition and who want to take the deposition of the same witness and other witnesses at ULS who might reveal the real intent of Bank of America. The question which is sought to be answered is why the mega banks are fighting so hard to take less money in a foreclosure sale then they would get in a modification or even a short sale. The policy is obvious. Borrowers are lured into a hole that gets deeper and deeper so that foreclosure seems inevitable and indefensible. Even after a successful trial modification the banks are turning down the permanent modification, as though they had the power to do so.

Now a number of attorneys are preparing motions to the trial court in Massachusetts to unseal the transcript of the ULS employee. Bank of America is opposing these efforts on the grounds of “confidentiality” which from my perspective makes absolutely no sense. Why would Bank of America share confidential information or trade secrets with a vendor whose only purpose was to interfere with the modification process? My opinion is that the only information that Bank of America wishes to keep secret is that the instructions they gave to ULS clearly show that Bank of America was not interested in anything other than achieving a foreclosure sale in as many cases as possible.

In nearly all cases the modification of the loan more than doubles the prospect of proceeds from the loan and in some cases approaches 100%. Thus the full-court press from the megabanks to go to foreclosure is a mystery that will be solved. My sources from inside the industry together with my own analysis indicates that the reason is very simple. The banks took in money from investors, insurers, counterparties in credit default swaps, the Federal Reserve, the Department of the Treasury and other parties based on the representation of the banks that (A) the banks owned the mortgage bonds and therefore on the loans and (B) there was a loss resulting from widespread defaults on mortgages. Under the terms of the various contracts within the false chain of securitization and the Master servicer had sole discretion as to whether or not the value of the mortgage bonds and the asset pools had declined and had sole discretion as to the amount of the loss caused by the defaults. Both representations were false — the Banks did not own the bonds or the loans and the loss was not even close to what was represented to insurers and other third parties.

As a general rule of thumb, the banks computed value of the collateral at around 25% and therefore received payment to compensate the banks for a 75% loss. They received the payment several times over and then sold the mortgage bonds to the Federal Reserve for 100% of the face value of the bonds. It can be fairly estimated that they received no less than 250% of the principal amount due on each of the loans contained within the asset pool that had issued each mortgage bond. While they had to create the appearance of objectivity by showing a number of the loans as performing, they intentionally overestimated the number of loans that were in default or were in the process of going into default.

Let us not forget that while nobody was looking the Federal Reserve has been “purchasing” the worthless mortgage bonds at the rate of $85 billion per month for a long time and doesn’t appear to have any intention of stopping that flow of money to banks that have already received more than 100% of the principal due on the notes. And lest you be confused, the money the banks received should have gone to the investors and should never have been kept by the banks. The purchases by the Federal Reserve at 100% of face value despite a market value of zero is merely a way for the Federal Reserve to keep the mega banks floating on an illusion.

Since the banks received 250% of the principal amount due on the loan, an actual recovery from the borrower of 100% (for example) on the loan would leave the banks with a liability to all of the third parties that paid the banks. The refund liability would obviously be 150% of the principal amount due on the loan and the banks would be required to turn over the hundred percent recovery from the borrower to the investors adding to their liability. THIS IS WHY I SAY CALL THEIR BLUFF AND OFFER THEM ALL THE MONEY DEMANDED ON CONDITION THAT THEY PROVE OWNERSHIP AND PROVE THE LOSS IS ACTUALLY THE LOSS OF THE BANK AND NOT OF THE INVESTORS.

But if the case goes through a foreclosure sale, the banks can take a comfortable position that the number of defaults and the depth of the loss was as great as they represented when they took payment from insurers and other third parties. The liability of 250% is completely eliminated. Thus while it might appear to be in the bank’s interest to take a 60% recovery from the borrower instead of a 25% recovery from a foreclosure sale, the liability that would be created each time alone was modified or settled would dwarf the apparent savings to the pretender lender or actual creditor.

The net result is that on a $100,000 loan, the investor takes an extra $35,000 loss over and above what would normally apply in a workout and the bank avoids $250,000 in liabilities to third parties who paid based upon false representations of losses.

The mere fact that they went to great lengths to seal the transcript indicates how vulnerable they feel.

PRACTICE MEMO TO FORECLOSURE DEFENSE LAWYERS

As a condition precedent I would suggest that in all cases where we feel the deposition transcript would be helpful I think it would create more credibility if you issued a subpoena duces tecum directed at Urban to produce the witness whose deposition was sealed in the existing case and to bring those records that were requested or demanded at that deposition. One of the questions that needs to be answered is whether the witness witness is still working for Urban, whether the witness has “disappeared”, and whether his testimony has changed — thus we would need the other deposition to test credibility and perhaps get exhibits that BANA either didn’t object to, which means they waived confidentiality. If they do not move to quash the subpoena then they might also be arguably waiving the confidentiality objection.
If they do object, you have two bites of the apple — if they move to quash they must state the grounds other than than it will damage their chances in litigation. The trial court would then hear the objections and of course each if the cases that could benefit from unsealing the deposition results in a hearing, then several judges would hear the same objection. The likelihood is that the objection would attempt to bootstrap the order sealing the deposition as reason enough to quash the subpoena. That in turn puts pressure on the Massachusetts judge to release the transcript.
The more Motions filed the better. So I would suggest that we reach out through media to get as many people as possible with separate motions saying that sealing the deposition is causing a disruption in due process. Since Urban reached out on behalf of BANA — an allegation that should be made in opposition test the motion to quash the subpoena in each case — exactly what confidential information needs to be protected? Has the Massachusetts court heard a motion in liming preventing the use of the deposition at trial? If not, then the objection is waived since the Plaintiff will clearly use the deposition at trial, if there is one.
The other issue is that BOA can’t simply allege confidentiality rather than strategy in litigation. They must state with particularity what could be possibly confidential. There is no attorney-client privilege, there is no attorney work product privilege.  At first Bank of America disclaimed any knowledge or relationship with ULS.  When it became obvious that the relationship existed and that ULS was using Bank of America letterhead to communicate with borrowers they finally admitted that the relationship existed and then went one step further by alleging confidentiality and trade secrets so that the contract and instructions between Bank of America and ULS would never see the light of day., For a company that BOA disclaimed any knowledge but who used BOA stationery they were clearly an agent of BANA. What exactly could Urban have other than information about modification and foreclosure? I would also notice or subpoena BANA to produce the person who signed the contract with Urban and to bring the contract with him or her. Who received instructions from BOA? Where are those instructions? Were they produced at the sealed deposition.
 If the Massachusetts court does not unseal the transcript, doesn’t this give BOA an opportunity for a do-over where they fabricate documents that are different from those produced in the sealed deposition?
What were the instructions to Urban? What was the goal of the relationship between BOA and URban? Where are the scripts now that we’re produced in the sealed deposition?
Were the instructions to Urban the same as the instructions to all vendors assisting in the foreclosure process? Why did BOA even need Urban if it had proof of payment, proof of loss,  proof of ownership of the loan? We want to know what scripts were used by Urban and whether the same scripts were distributed to other vendors whose behavior could be plausibly denied. Discovery is a process by which the party seeking it must only show that it might lead to the discovery of admissible evidence. THE POINT MUST BE MADE THAT THE DEFENSE FOR WHICH WE ARE LOOKING FOR SUPPORT AND CORROBORATION IS THAT THE DELIBERATE POLICY AND PRACTICE OF BOA WAS TO MOVE PEOPLE INTO DEFAULT BY TELLING THEM TO STOP MAKING PAYMENTS. WE WANT TO SHOW THAT THEIR GOAL WAS FORECLOSURE NOT MODIFICATION CONTRARY TO THE REQUIREMENTS UNDER HAMP AND HARP AND THAT RATHER THAN PROCESS MODIFICATION OR SETTLEMENTS THE POLICY WAS TO DERAIL AS MANY AS POSSIBLE TO GET THE FORECLOSURE EVEN IF IT MEANT THAT THE INVESTORS WOULD GET LESS MONEY? Why?
The instruction was to use the promise or carrot of modification to trick the homeowner into (a) acknowledging BOA as the right party (b) stop making payments causing an apparent default and causing an escrow shortage (c) thus assuring the foreclosure sale despite the fact that BOA never acquired and (d) thus assuring that claims against them from investors (see dozens of law suits against BOA) and from insurers and counter parties on credit default swaps and payments from co-obligors based on the “default” that BOA fabricated — payments that involved more than the loan itself in multiples of the supposed loan balance.

This is an important battle. Let’s win it. There is strength in numbers. We might find the scripts were prepared by someone who used scripts from other banks and that the banks were in agreement that despite the obligations under HAMP and HARP and despite their ,rinses in the AG and OCC settlement, their goal is to foreclose at all costs because if the general pattern of conduct is to settle these loans and make them “performing” loans again it is highly probable that for each dollar of principal that gets taken of the table there is a liability or claim for $10. This would establish that the requirements of HAMP and HARP has resulted in negotiating with the fox while the fox is in the henhouse getting fat.

ALL MAJOR FINANCIAL FEDERAL AGENCIES ENTER CEASE AND DESIST ORDER AGAINST MERS

CLE SEMINAR: SECURITIZATION WORKSHOP FOR ATTORNEYS — REGISTER NOW

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary SEE LIVINGLIES LITIGATION SUPPORT AT LUMINAQ.COM

ALL MAJOR FEDERAL AGENCIES JOIN IN ORDERING MERS TO STOP CURRENT PRACTICES

Just released. Thanks to Dan Edstrom our senior securitization analyst for alerting me.

SEE MERS_Cease_and_Desist_2011_04_13

MERS AND MERSCORP ENTERED INTO A CONSENT CEASE AND DESIST ORDER FINDING DEFICIENCIES IN THE PRACTICES AND PROCEDURES THAT POSE A RISK TO THE MEMBER BANKS.

ABSTRACT OF ORDER

The Agencies find, and MERS and MERSCORP neither admit nor deny, the following:
(1)    MERS is a wholly-owned subsidiary of MERSCORP. MERSCORP’s shareholders include federally regulated financial institutions that own and/or service residential mortgages, including Examined Members, and other primary and secondary mortgage industry participants.
(2)    MERSCORP operates a national electronic registry that tracks beneficial ownership interests and servicing rights associated with residential mortgage loans and any changes in those interests or rights. There are approximately 5,000 participating Members, of which 3,000 are residential mortgage servicers. Members register loans and report transfers, foreclosures, and other changes to the status of residential mortgage loans on the MERS System. There are currently approximately 31 million active residential mortgage loans registered on the MERS System. Examined Members receive a substantial portion of the services provided by MERSCORP and MERS.
(3)    MERS serves as mortgagee of record and nominee for the participating Members in local land records. MERS takes action as mortgagee through documents executed by “certifying officers” of MERS. MERS has designated these individuals, who are officers or employees of Members or certain third-parties who have contractual relationships with Members, as officers of MERS. By virtue of these designations, the certifying officers execute legal documents in the name of MERS, such as mortgage assignments and lien releases.
MERS Consent Order
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(4)    In connection with services provided to Examined Members related to tracking, and registering residential mortgage loans and initiating foreclosures (“residential mortgage and foreclosure-related services”), MERS and MERSCORP:
(a)    have failed to exercise appropriate oversight, management supervision and corporate governance, and have failed to devote adequate financial, staffing, training, and legal resources to ensure proper administration and delivery of services to Examined Members; and
(b)    have failed to establish and maintain adequate internal controls, policies, and procedures, compliance risk management, and internal audit and reporting requirements with respect to the administration and delivery of services to Examined Members.
(5)    By reason of the conduct set forth above, MERS and MERSCORP engaged in unsafe or unsound practices that expose them and Examined Members to unacceptable operational, compliance, legal, and reputational risks.
Pursuant to the authority vested in them by the Federal Deposit Insurance Act, as amended, 12 U.S.C. §§ 1818(b), the Bank Service Company Act, 12 U.S.C. § 1867(c)-(d), and the Federal Housing Enterprises Financial Safety and Soundness Act, 12 U.S.C. § 4631, the Agencies hereby ORDER that:
ARTICLE III COMPLIANCE COMMITTEE
(1)    Within twenty (20) days of this Order, the Boards of Directors of MERSCORP and MERS (the “Boards”) shall each establish and thereafter maintain a Compliance Committee of at least three (3) directors, of which at least two (2) may not be employees or officers of MERS or MERSCORP or any of their subsidiaries or affiliates. In the event of a change of the
MERS Consent Order
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membership, the name of any new committee member shall be submitted to the OCC Deputy Comptroller for Large Bank Supervision (“Deputy Comptroller”). The Compliance Committee shall be responsible for monitoring and coordinating MERS’ and MERSCORP’s compliance with the terms and provisions of this Order. The Compliance Committee shall meet at least monthly and maintain minutes of its meetings.
(2)    Within ninety (90) days of this Order, and within thirty (30) days of the end of each calendar quarter thereafter, the Compliance Committee shall submit a written progress report to the Boards setting forth in detail its actions taken to comply with each Article of this Consent Order, and the results and status of those actions.
(3)    The Boards shall forward a copy of the Compliance Committee’s report, with any additional comments by the Boards, to the Deputy Comptroller and the OCC Examiner-in- Charge within ten (10) days of receiving such report.
ARTICLE IV ACTION PLAN
(1)    Within ninety (90) days of this Order, MERS and MERSCORP shall jointly develop and submit to the Deputy Comptroller an acceptable plan containing a complete description of the actions that are necessary and appropriate to achieve compliance with the terms and provisions of this Order (“Action Plan”), as well as the resources to be devoted to the planned actions, with respect to services provided to Examined Members. In the event the Deputy Comptroller requests MERS or MERSCORP to revise the Action Plan, they shall immediately make the requested revisions and resubmit the Action Plan to the Deputy Comptroller. Following acceptance of the Action Plan by the Deputy Comptroller, MERS and
MERS Consent Order
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MERSCORP shall not take any action that would constitute a significant deviation from, or material change to the requirements of the Action Plan, or this Order, unless and until MERS or MERSCORP have received a prior written determination of no supervisory objection from the Deputy Comptroller.
(2)    The Boards shall ensure that MERS and MERSCORP achieve and thereafter maintain compliance with this Order, including, without limitation, successful implementation of the Action Plan. The Boards shall further ensure that, upon implementation of the Action Plan, MERS and MERSCORP achieve and maintain effective residential mortgage and foreclosure- related services on behalf of Examined Members, as well as associated risk management, compliance, quality control, audit, training, staffing, and related functions. In order to comply with these requirements, the Boards shall:
(a)    require the timely reporting by MERS and MERSCORP management of such actions taken to comply with this Order and/or directed by either Board to be taken pursuant to this Order;
(b)    follow-up on any compliance issues with such actions in a timely and appropriate manner; and
(c)    require corrective action be taken in a timely manner for any non- compliance with such actions.
(3)    The Action Plan shall address, at a minimum: (a)    the capability of the Boards and senior management to ensure that MERS
and MERSCORP are operated in a safe and sound manner in accordance with applicable laws, regulations and requirements of this Order;
MERS Consent Order
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(b)    development and implementation of a strategic plan to include a comprehensive review of business operations, including the risks associated with each business line, and recommendations to implement the strategic plan;
(c)    consistent with the strategic plan, development and implementation of a financial plan to ensure that MERSCORP and MERS have adequate financial strength to support business operations related to Examined Members. The financial plan, at a minimum, shall address:
capital;
and liquidity risk; and
(i)
(ii)
any need for additional capital, including the amount and source of
the identification, measurement, monitoring and control of funding
(iii) discretionary expenses and improve and sustain earnings, as well as maintain adequate reserves for contingency risks and liabilities;
(d)    development and implementation of a comprehensive litigation strategy to effectively manage lawsuits and legal challenges involving MERS and MERSCORP, regardless of whether MERSCORP or MERS is a named party, including early identification and tracking of such lawsuits and challenges;
(e)    development and implementation of a communication plan to communicate effectively and in a timely manner with MERSCORP’s shareholders, Members including Examined Members, and relevant external parties;
(f)    development and implementation of a compliance and quality assurance program for ensuring that Examined Members implement and follow all of the Rules, including
MERS Consent Order
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a profit and budget plan to include specific goals to reduce
adherence to the requirements set forth in MERS Announcement 2011-01, dated February 16, 2011;
(g)    development and implementation of a plan to ensure that MERS certifying officers are transitioned expeditiously onto the Corporate Resolution Management System (“CRMS”) in accordance with MERS’ current certifying officer policy and process;
(h)    development and implementation of appropriate standards to maintain separation of corporate functions between MERS and MERSCORP;
(i)    review of the effectiveness of the Rules, and related Procedures, Terms and Conditions to determine what, if any, additions, amendments, or deletions are appropriate;
(j)    development and implementation of enhanced information reporting practices to senior management from lower levels of each organization, and from senior management to the Boards to ensure that significant issues are properly identified and escalated, and that corporate actions are considered, taken in a timely fashion, and properly documented;
(k)    any Matter Requiring Attention in the OCC Supervisory Letter No. MERS 2011-01, dated January 19, 2011, that addresses an issue that is not otherwise covered by provisions of this Order; and
(l)    development of contingency plans to address issues that arise with respect to any of the foregoing elements of the Action Plan, including plans that address operational continuity issues in the normal course of business and in a stressed environment.
(4)    The Action Plan shall specify timelines for completion of each of the requirements of this Order. The timelines in the Action Plan shall be consistent with any deadlines set forth in this Order.

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