In yesterday's blog on the Bear Stearns and EMC's settlement of $28 million with the FTC, I noted Katie Porter's report indicating the lack of regulation within the mortgage servicing industry. I also thought it was stunning that the settlement did nothing to address those homeowners who lost their homes due to fraud.
Here's Katie Porter's thoughts on the recent Settlement;
It's Easier to Shoot Roadkill than Big Game
By Katie Porter
I'm a little miffed about the recent FTC settlement with Bear Stearns and its subsidiary, EMC Mortgage Corporation. The complaint alleged that EMC engaged in unlawful practices in servicing consumers' home mortgage loans, including violating the Fair Debt Collections Practices Act, the Fair Credit Reporting Act, and the Truth in Lending Act.
The FTC brought the complaint pursuant to its enforcement authority to regulate unfair and deceptive practices. A recently announced settlement requires Bear and EMC to pay $28 million to the FTC and enjoins the company from engaging in the alleged illegal practices.
Given my concern about poor mortgage servicing, you might expect me to have nothing but praise for the FTC. But my first reaction to the settlement was that the FTC is shooting roadkill. What do I mean? As Elizabeth Warren wrote back in May, "The Bear is Dead." It's easy to shoot a still target. Notably, the settlement order does not apply to JP Morgan, which purchased Bear Stearns.
While EMC continues to function (even touting its "customer service" to borrowers on its webpage), the mortgage industry is reeling and I'm guessing the FTC won't be the only party standing in line with a judgment to collect.
The FTC may have the same concerns; the settlement obligates Bear/EMC to wire transfer the $28 million in cash to the FTC within a few days. Even assuming that EMC or Bear pays the $28 million, why didn't the FTC take action sooner? Regulators have had deaf ears for years with regard to consumer complaints and allegations of mortgage servicing abuse.
While the FTC may have been negotiating with EMC for some time before it filed the complaint and reached settlement, during that period EMC presumably continued its practices, allegedly lying to consumers, some of whom may have lost their homes as a result of EMC's poor record keeping.
Since EMC services about half a million loans, the injunctive relief prohibiting EMC from initiating any foreclosure action or assessing any fee without making sure its records are accurate, correcting any prohibited practices, and investigating any consumer complaints could protect consumers from wrongful foreclosure or being overcharged.
But the bigger question is what influence, if any, will the settlement have on other servicers? Will the remaining live targets of investment banks (a number that dwindles each day, it seems) fear that the FTC will reload its rifle and reform their servicing practices accordingly?
Source: Creditslips.org
Here's Katie Porter's thoughts on the recent Settlement;
It's Easier to Shoot Roadkill than Big Game
By Katie Porter
I'm a little miffed about the recent FTC settlement with Bear Stearns and its subsidiary, EMC Mortgage Corporation. The complaint alleged that EMC engaged in unlawful practices in servicing consumers' home mortgage loans, including violating the Fair Debt Collections Practices Act, the Fair Credit Reporting Act, and the Truth in Lending Act.
The FTC brought the complaint pursuant to its enforcement authority to regulate unfair and deceptive practices. A recently announced settlement requires Bear and EMC to pay $28 million to the FTC and enjoins the company from engaging in the alleged illegal practices.
Given my concern about poor mortgage servicing, you might expect me to have nothing but praise for the FTC. But my first reaction to the settlement was that the FTC is shooting roadkill. What do I mean? As Elizabeth Warren wrote back in May, "The Bear is Dead." It's easy to shoot a still target. Notably, the settlement order does not apply to JP Morgan, which purchased Bear Stearns.
While EMC continues to function (even touting its "customer service" to borrowers on its webpage), the mortgage industry is reeling and I'm guessing the FTC won't be the only party standing in line with a judgment to collect.
The FTC may have the same concerns; the settlement obligates Bear/EMC to wire transfer the $28 million in cash to the FTC within a few days. Even assuming that EMC or Bear pays the $28 million, why didn't the FTC take action sooner? Regulators have had deaf ears for years with regard to consumer complaints and allegations of mortgage servicing abuse.
While the FTC may have been negotiating with EMC for some time before it filed the complaint and reached settlement, during that period EMC presumably continued its practices, allegedly lying to consumers, some of whom may have lost their homes as a result of EMC's poor record keeping.
Since EMC services about half a million loans, the injunctive relief prohibiting EMC from initiating any foreclosure action or assessing any fee without making sure its records are accurate, correcting any prohibited practices, and investigating any consumer complaints could protect consumers from wrongful foreclosure or being overcharged.
But the bigger question is what influence, if any, will the settlement have on other servicers? Will the remaining live targets of investment banks (a number that dwindles each day, it seems) fear that the FTC will reload its rifle and reform their servicing practices accordingly?
Source: Creditslips.org
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Katie:
The servicers are not bothered by the frail hand of the Federal Trade Commission. This is supported by the FTC's 2003 investigation into Fairbanks Capital.
The industry waited to see what the FTC would do when Fairbanks (one of the mortgage fraud ring's own) got caught participating in the industry's widespread illegal practices.
When Fairbanks was fined a measly $55 million, the FTC settlement provided the mortgage-banking industry with an incentive to crank up their fraud machine. (it was estimated that Fairbanks stole ~ $4 Billion.)
The EMC investigation is just a watered-down version of the Fairbanks fiasco. It is a known fact some victims lost hundreds of thousands of dollars to EMC, while the FTC and others stood there and just watched it happen.
The FTC settlement reimbursed the victims of this criminal enterprise $446.00. Where is the rest of their money??? Does EMC get to keep it?
Another fact that has just been verified by a law firm, is that EMC did not supply the FTC with a complete list of the homeowners they swindled. I randomly checked only a dozen EMC victims, and only "two" were on the list EMC submitted to the FTC.
EMC has also breached the FTC settlement agreement by continuing the same illegal practices the settlement was supposed to stop.
This FTC case is not over.