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By Michael Olenick, a regular contributor on Naked Capitalism. You can follow him on Twitter at @michael_olenick
Every time it appears that the OCC foreclosure reviews have hit bottom they sink further into the morass. Our latest example comes from a petition GMAC/ResCap filed as part of their bankruptcy. This example shows how banks are spending simply staggering, implausible amounts of money on foreclosure “reviews”, and how keen they are to enrich anyone other than wronged borrowers. Given that some of these foreclosure reviewers are also in the business of “scrubbing” loan files and creating (as in fabricating) allonges, you have to wonder whether the amount of money being spent is not on review but also “remediation” and is being bundled in with the review costs. Think of the twofer: you get to call your chicanery something else, and blame the cost on the banks’ favorite scapegoat, those big meanie regulators.
This information comes from a petition GMAC/ResCap filed as part of their bankruptcy and exposes the multiple and pricey roles being played by PriceWaterhouseCoopers (hat tip friend, colleague, and foreclosure defense super lawyer Matt Weidner).
As has already been noted in a multi-part investigative series by Jeff Horwitz and Kate Berry of American Banker these reviews are expensive; so expensive they are projected to pay $4 to reviewers for every $1 paid to homeowners. GMAC alone projects they may spend $250 million on reviews by PriceWaterhouseCoopers (PWC). In the 90 days beginning January 12, 2012, GMAC spent $51,658,206. They do not disclose the number of loan reviews this covered though, in a different petition, they clarify they used sampling to review 5,000 loans and 12,000 “borrower outreach complaint samples.” Giving them the benefit of the doubt, that every loan was reviewed during the 90-days, that comes to an obscene $10,331.64/loan. In contrast, Fannie and Freddie pay $1,250 in legal fees for an entire judicial foreclosure, beginning to end.
Several fee schedules are included, with varying roles and amounts, though it’s clear that everybody is well paid. Associates bill $235/hr., Senior Associates bill $300/hr., Managers bill $370/hr., Senior Managers bill $470/hr., Managing Directors are paid $610/hr., and Partners bill at $630/hr. To compare and contrast salary.com reports the 90th percentile pay for Family Practice Physician’s is $225,931, which comes to $868.97/day. So it’s less expensive to have a doctor spend a whole day figuring out what ails a person than it is to have a PwC partner spend 90 minutes reviewing what’s wrong with foreclosure files.
At the rates PwC charges a Senior Associate, Manager, and Partner each have to spend eight hours on a file, which comes to about 21 hours more than the top foreclosure defense lawyers tell me they spend on initial file intake. Foreclosure defense lawyers initial 2-3 hour review yields an approximate 95% serious error rate, though it probably helps to be a local, licensed lawyer when reviewing files for legal fraud. The number of hours being billed is so absurd relative to any possible actual work involved that it’s obvious PwC is not being paid for its expertise, but to give a clean/largely clean bill of health, and the banks will pay whatever it takes to get that.
This raises the question of who trained PwC and the answer is interesting: GMAC, the firm being audited for fraud. “During their engagement, PwC professionals have developed institutional knowledge regarding [GMAC’s] operations and systems.” Great.
Since part of the review involves performing legal analysis, specifically “potential violations of state foreclosure laws .. [and] the Debtors’ standing to bring foreclosure actions…” Legal analysis is, of course, a regulated activity so this is sent to a law firm, Hudson Cook. I had to click through to exactly the second partner in the list to find he is a past member of the Mortgage Banker Association’s “Alt-A and Nonprime Council.” Further, their clients include Bank of America, Bank of New York, Citibank, JP Morgan Chase, National City Bank, Ocwen, PNC Bank, and several mortgage insurance companies. I’m sure they’ll diligently scour for bank perpetrated foreclosure fraud. Of course, maybe they’re forwarding the files to local lawyers in individual states since using, say, a Maryland attorney to draft a legal opinion of a Florida case is likely the Unlicensed Practice of Law. If that’s the case – and there is nothing to indicate whether it is – hopefully they’re studiously avoiding lawyers from shuttered foreclosure lawyers, since in that case the lawyers would be screening their own files for fraud. If either the OCC or the state Bar Associations apparently see nothing wrong with any of this PwC did not mention it in their quarter-billion dollar motion.
One thing they did mention, repeatedly, is that they are simultaneously working for and working closely with mortgage servicer Nationstar to raise capital to purchase GMAC assets. They’ve even given a name to the team, the “PwC Nationstar Team,” which they put in quotes, and explained that there will be “no communications or exchanges of information protected as confidential or as client secrets” because they established an “ethical wall,” which they also put in quotes. They do mention conflicts of interest, and promise to use “reasonable efforts” to file a supplemental declaration should they find any. That’s reassuring.
For those steep fees PwC is putting a lot on the line: they agreed to self-indemnify for gross negligence and intentional misconduct as opposed to, say, everything. Since GMAC is a $16 billion corporate welfare creation you’d think that PwC, with their full-freight charges, would assume full professional liability but that’s not the case. Quoting Mel Brooks, “it’s good to be King.”
Yves asked me to write this article almost a week ago and I procrastinated. Partly it was the election, where we saw Republicans melt down in real-time as delusional polling collided with reality, something I expect soon enough in the broader housing market. But there was something deeper: it’s exhausting to continually write about overt awful behavior related to foreclosure fraud review. The last piece I wrote, where a former Countrywide consultant was overseeing the AG settlement, received a low number of comments. I don’t think that piece was poorly written; I think Naked Capitalism readers are also exhausted, or not surprised.
While on one level, it’s fitting that banks are paying a lot of money to deal with the foreclosure mess, this money isn’t going to fix the problem, or help borrowers, it’s just papering over abuses so that the banks and regulators can pretend they’ve improved matters. However, if we’re ever going to rebuild a private mortgage market the public has to be regain trust in both the financial system as well as regulatory oversight. We’re arguably moving further away from that goal, not closer; we’re exhausted, tuned out, and so emotionally calloused to scandal that nothing fazes us anymore. I lay the blame on this squarely on Obama and his Administration. Hopefully he’ll deliver some of the Hope he promised in 2008 and fix this dearth of trust by focusing some of his zeal for “personal responsibility” on the people who caused and continue this mess.
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You note that these phony “reviews” are “projected to pay $4 to reviewers for every $1 paid to homeowners. ”
Some enterprising home owners ought to offer to do the review OF THEIR OWN LOANS. They could quickly make enough cash to pay the thing off.
Or… I’m sure they would gladly forgo the review and take the $10,332 it costs to do the review and call it a day.
Oh dear, Michael – methinks the only “hope” we can have for the Obama admin is that the Reps will continue to react with such a knee jerk “NO!” to anything he proposes that he won’t be able to execute the Grand Betrayal – he was ready to give away the farm with all the chickens and cows before, but the Reps turned him down. Maybe Boehner/Cantor et.al. have slapped them silly and said – “look you idiots – this dude is ready to hand us on a silver platter everything we have wanted for decades – don’t say no again! And the best part is when it falls apart politically, they will get the blame! Don’t you get it, turkeys!” slap, slap, slap
Two degrees of greed:
It is darkly humorous but not very comforting that greed would be saving us from greed. Which is the lessor of the two? The one protecting us from itself by it’s wacky refusal to agree even to utterly fake loop-hole tax cuts on the rich or the one that pretends to be a solicitous compromise wherin real and substantial cuts are made to the safety net?
“I am not going to ask students and seniors and middle-class families to pay down the entire deficit while people like me, making over $250,000, aren’t asked to pay a dime more in taxes. I’m not going to do that,[…]” (emphasis mine) -Obama just after his recent grand scam, the second
(election?)RNC/DNC selection.I wouldn’t bet on either and, speaking of false hope, I don’t believe we will see Elizabeth Warren riding to the rescue of anyone other than Obama anytime soon. A more plausible public stance from Warren will be that the cuts to the safety net – what ever the final Grand Betrayal amounts to – are a painful but necessary compromise (“The hardest vote I’ve had to take so far” – just a guess). That, I suspect, is the price she will have to pay in order to get on any meaningfull committe or task force.
Reminds me of SarbOx. The only apparent value of that legislation is enriching auditors and internal control consultants.
Yeah Michael, thanks for the posting. It is great to know that the Big Lie technique is alive, well and effective as we saw in this past weeks anointment.
There are none in jail after 4+ years and it looks like another step down is coming. This event will probably involve even more Big Lies and further distortion of the rule of law.
Yeah, we ought to do something about it………other than textual white noise.
Personally I would like to see some pot and pan banging but show me the leadership in this country that is going to seriously stand up to the current regime.
You mentioned getting a low number of comments, so I decided to chip in.
“However, if we’re ever going to rebuild a private mortgage market the public has to be regain trust in both the financial system as well as regulatory oversight.”
The monetary system will collapse prior to that happening. It’s like trying to revive a sclerotic 80 year old with diabetes and liver failure who’s having a heart attack. I mean, would the process of trying treat him kill the patient? And anyway, what exactly is the point of it?
I’ll give Michael my 2 cents too, even though it’s true, we are all exhausted. Exhausted because there has been a lockdown on the facts – forget the truth. Not even Obama the Big One can fix this mess of his own creation. Unless he has a pogrom on his own administration. It is terrifying because, in the end, all we have is Trust to keep us together. Banking analysts like Chris Whalen said openly on TV interviews and in their articles that they couldn’t discuss securitization and foreclosure fraud. WTF? And the OCC rolls on merrily doing “reviews” with the banks and PwC like they have nothing to worry about. It’s just too Alice in Wonderland.
So I do like it that you (Michael) say they are going to collide with reality, but I don’t see it coming – and not because I have my own confirmation bias – but because my civil rights have been violated and the entire country has been raped, patted on the head, and told to shut up. I feel like I’m the one recovering from a head-on collision.
You are not a loan. Here’s what the gutsy Irish are doing: https://peopleforeconomicjustice.com/what-is-debtoptions/
Different country, basically the same banks.
“. But there was something deeper: it’s exhausting to continually write about overt awful behavior related to foreclosure fraud review. The last piece I wrote, where a former Countrywide consultant was overseeing the AG settlement, received a low number of comments. I don’t think that piece was poorly written; I think Naked Capitalism readers are also exhausted, or not surprised.”
Otherwise known as secondary or vicarious trauma. Trauma expert Dr. Judith Herman remarks that institutions too shut down in denial, and thereby become complicit in exacerbating or enabling trauma to continue.
But shutting down in burn out is not the answer.
Do some good self-care and then get back to it, please! Like Eli Wiesel pointed out, what was more painful than atrocity was knowing that it went on without objection from those with the freedom to speak out about it.
The only time you agree to pay fees like that be it to one of the Big Four firms or the crack whore working a convention centre hotel bar is for “special services”.
I don’t expect to see a private mortgage market again in my lifetime. I do think that the corruption is so deep and the sytem so badly broken that a slow collapse is inevitable.
…not so much “slow collapse” as, “boil the frog slowly”…outcomes intended…
Why should banks continue to get a pass in the multi-car pileup of mtg servicer error?
Well, because neutered regulators are standing down, as over-lord ‘lil Timmy G. decides which among them will get to hire him come Feb. 2013.
Here in Florida we have have been derided as deadbeats, played for suckers as servicers enjoy fee-gasms at our expense, and ignored by pols of all parties.
I am not in trauma, secondary or otherwise. I’m wide awake and full conscious as my family’s financial health is usurped by $BAC.
Mr. Moynihan – you want my house? That I put 28% down on? With a 30-yr mtg., 6.25%? No HLOC or cashout or second of any kind, ever?
‘mon and get it. You sent f.c. papers in June, 2012. I sit here awaiting for word, and nothin’ yet. Take your time, Brian.
I will wait.
“Paper over” – to paper over dis mess deys gonna need lotsa paper. That’s why the big bucks. The bigger payments for loan reviews and they appear to be diligent. What I do not understand is that you identified that GMAC is in bankruptcy – with a bankruptcy court. Where the hell is the court oversight on this crazy spending? Look, were I an investor in GMAC I would be spittin fire right about now. Yes, I know, investors would never be made whole through bankruptcy, but they should not be abused again during the proceedings. This is absurd.
I got my loan through a Credit Union, I paid a little more [not much] and when I ran into employment issues*, the Credit Union worked with me.
[I’m in a profession that likes it’s workers between 27-32]
I just refinanced through my credit union that also held the original mortgage. Then they sold it to GMAC. I was very disappointed.
Mike, keep writing. It is exhausting, and no new nadir will be shocking to those of us in this mess for years and years. That said, it’s worth it to read your work if for no other reason that it validates the experiences of systemic, unpunished, ignored abuses. I live in a small town. The folks I see on the county record that have a Lis Pendens filed on their property don’t seem to want to discuss it openly. The stigma of shame is still in place here. Maybe someone reads your work silently. Maybe the silent will get the courage to speak up and find an attorney that will defend them in court. Or somehow not just accept everything the bank says as gospel.
Yes, keep writing. More than you think are reading.
I agree, keep writing. Creating a body of work that can in the future be used to show what went wrong and where will be vital in many ways.
See yourself as part of history and your contributing to the counter narrative by showing truth. Justice moves slowly.
Wake up young man, it’s time to wake up
Your love affair has got to go
For 10 long years, for 10 long years
The leaves to rake up
Slow suicide’s no way to go
Thanks, Michael. The outrage fatigue is rather painful, especially post-election, when the prime perp is again rewarded for his crimes by a feckless, self-serving liberal elite and a 98.5% morally-challenged electorate. Be assured, however, that your labor of love is greatly appreciated and will bear bountiful fruit in due time.
At least one judge get it.. From today’s links (corrected link)
http://www.nakedcapitalism.com/2012/11
http://newsandinsight.thomsonreuters.com/Legal/News/ViewNews.aspx?id=60909&terms=%40ReutersTopicCodes+CONTAINS+'ANV‘
Banks should fear ominous new rulings in Fannie/Freddie MBS cases
11/9/2012
“”The banks, in other words, are not going to be able to persuade Cote that Fannie and Freddie knew what they were getting when they invested in subprime-backed MBS, so they shouldn’t be able to make claims against issuers. Cote said that the banks can try to persuade a jury otherwise. She also said JPMorgan can tell a jury that it didn’t knowingly deceive Fannie and Freddie. But you have to regard Cote’s references to a jury trial as code for encouraging settlement talks. She’s signaling that she’s not going to be receptive to bank arguments on summary judgment, and warning that if the case continues, the banks will have to defend their underwriting to a group of ordinary people who aren’t likely to be kindly disposed to them.””
“””FHFA alleges that the defendants acted recklessly by seeking to profit from ever more risky mortgage lending while, at the same time, passing on the risk (and ultimately the losses) associated with these practices to the public via their sale of securities to Fannie Mae and Freddie Mac,” Cote said. The judge went on to turn the banks’ arguments that Fannie and Freddie’s MBS losses were due to a downturn in the housing market completely against the banks. They’re not the victims of the housing crisis, she wrote, but (at least according to FHFA) the cause of “the most severe economic downturn this country has experienced since the Great Depression.” And yes, she said, “These allegations are sufficient to support the plaintiff’s demand for punitive damages.””
Yes ,please do keep up the good reporting.as much as it is true every wrinkle in the fabric of our complex web of deciets,can’t really suprise anyone who trys to pay attention.And even if it does get old saying/feeling…this is wrong,and surely no one is going to do anything about it,yada,yada,yada….just like your morning addiction,it has to be satisfied. to watch the train wreck as it is happening….
it also is a state of affairs that needs to be refreshed every day.after all. the spin meisters and public relations hoardes/whores spend everyday saying yesterdays transgressions were in the past… and it is time for us to look forward, and fix these wrinkles…..yyada,yada,yada.Stories are needed everyday to combat the echochamber/propaganda of ever improving vigilance on every front/issue.We the people need daiy reminders of just how bad things are…IMO
too bad the declaration of independance, isn’t a law…. “they” are breaking the part about the governing power abusing those governed in a long and sustained train of abuses.to a desired end… one just as clear as georgeIII’s were….that we the people could supercede those with the power to tell us a crime is no longer a crime…
well, I guess if they can trash the constitution and the bill of rights…. what is a little declaration of independence…
Thanks for the post, Michael. Do they get credit for the money they spend on the reviews as part of their settlement obligation? That would add insult to injury.
What exhausts me is the effort that is put into educating people about what is going on, only to see headlines like this:
http://www.herald.ie/news/gaa-celebs-slammed-for-backing-quinn-as-4000-turn-out-for-rally-3183936.html
4000 people protest against the arrest of a corrupt banker because, according the press, the “people identify with succussful individuals” and believe that they “create jobs.”
Spellcheck: successful.
I worked (escrow firm owner) in the trenches during the go go days and my rage grew by the quarter during 2005-2007. My emotions have run the full spectrum. The spectrum: Disbelief at what we were closing, talking to clueless bankers (local) about the ramifications and having to grit my teeth and listen to the “it’s a new paradigm” economy bs, then rage at the collapse and people not taking responsibility and finally to apathy and “I don’t care.” Now this? Rage is back.
From an inside perspective, Michael, don’t give up, as this war ain’t over. The tide seems to be turning as there seems to have been sufficient public pressure recently to motivate the OCC into conceding that the foreclosure reviews under the auspices of the servicers themselves, is not leading us anywhere other than to sweep all their misdeeds under the rug as quickly as possible, as cheaply as possible. Those with a little moral integrity that are part of the process are doing all they can within the system to bring truth to light and all that you and Yves can do to continue to shine a spotlight on the process via this platform helps keep public pressure on the OCC to do the right thing……… for a change. As Neil Barofsky eloquently pointed out in his book, Washington does nothing unless there is a sense of public pressure to do otherwise, and your and Yves’ contributions are valued contributions to that end.
The only thing that would surprise me at this point would be criminal prosecutions. That being said those that are good at peeling away layers of the onion are still of vital importance. If not for your continued efforts fewer of us regular folks would know the facts, and without knowledge based on facts (and truth) all hope is gone.
Hi folks,
Thanks for the kind words!
I’m exhausted but nowhere near giving up. Not me, nor Yves, nor Matt, nor any of the others that we work with.
One of my NC articles on crooked foreclosure review firms was picked up by Gretchen Morgenson of the NYT and resulted in the shuttering of massively conflicted foreclosure review firm Allonhill. I also was at the center of a small group that closed down David J. Stern’s foreclosure mill, which was so bad that it ground the whole crooked system to a temporary halt (resulting in fewer foreclosures and house appreciation the other side now takes credit for). After two you’d think they’d take verifiable conflicts more seriously, but I guess not; I’m guessing it’s three strikes and — at least for bank supporters — the rules are changed and you get another strike.
Fighting for what’s right is exhausting. I hear you and, as long as I can, won’t be stopped.
Why are these auditors looking to see if the “debtor’ had standing to foreclose? (para 7) Who is being referred to as a “debtor” and why?
Because this is a corporate (Ch. 11) bankruptcy filing the “debtor” is GMAC/ResCap.
If you are targeting NC fraudsters don’t forget Hunoval Law and their shell Trustee firm Poore Substitute Trustee which is nothing more than a regus office suites mailbox. They have filed SCORES of fraudulent filings in North Carolina and, even when caught, continue with impunity. One of their attorneys used to work in the Clerks office which decides the outcome of non-judicial foreclosures. Its wink wink nod nod stamp stamp what sale date is good for you? The NC Commissioner of Banks, and the NC AG response? “We can’t get involved in individual cases.” When supplied MULTIPLE cases? No reply. Disgusting.
After reading Jeffrey Horowitz’s article in American Banker, I immediately contacted him and explained that NOT ONE HOMEOWNER had received even one dollar from the OCC Review – meaning the headline of his article was false (4 dollars for every 1 dollar). This is exhausting, but if we don’t keep trying to spread truth vs. lies, there is no future. As you and anyone can see, it all just keeps getting worse when leaving the banks to their own solutions. It is not unusual that the Financial Times in UK is the only publication writing about the banks using investors money as credit for the NMS penalties.
After reading Jeffrey Horowitz’s article in American Banker, I immediately contacted him and explained that NOT ONE HOMEOWNER had received even one dollar from the OCC Review – meaning the headline of his article was false (4 dollars for every 1 dollar). This is exhausting, but if we don’t keep trying to spread truth vs. lies, there is no future. As you and anyone can see, it all just keeps getting worse when leaving the banks to their own solutions.