Dodd started by noting the increasing evidence that foreclosure fraud is a giant mess, both by referencing the Bank of America testimony that notes did not get sent to trusts during the securitization process, and by noting that the estimates for how much this may cost the bank have gone up, to $134 billion.
Btw, it’s not part of the hearing, but consider this stat:
Housing and aggregate demand have not recovered because nearly 15 million owners are estimated to owe about $771 billion more on their homes than they are worth.
That basically means that roughly 15 million families have had a $51,000 tax imposed on them, largely because of the bank-created inflated prices.
Thus far, FDIC head Sheila Bair has said that second lien-holders need to take a hit, and Fed Governor Dan Tarullo has said that banks will need to provide estimates for expected putback losses.
OCC Acting head John Walsh says they’ve got 100 Bank Examiners investigating foreclosure fraud.
John Walsh, in response to Dodd’s question about why the regulators have been so delayed, said, “We were conducting horizontal exams in 2008, saw rise in complaints, there were clear deficiencies. We were pushing servicers.” No. He hasn’t explained why they haven’t done anything about these deficiencies.
Tarullo: The attention was focused on pace of modifications, not on the process itself.
Shelby to Tarullo: When did you first learn of the problems.Tarullo: When Ally came to us the day before the public announcement.
Shelby: Are we close to solving problem. Tarullo: Related to relative balance of foreclosures to mods. Need integrated approach.
Shebly: They have standards.
Tarullo: No, the banks are required to have their own processes. Race to foreclose among owners, but be standardized.
Reed: Should 100% of loans be evaluated for mod.
Bair: We think a global settlement.