Can Dodd-Frank fix mortgage servicing if we don’t know what went wrong?

by 14 Apr 2013

(Washington Post) -- It’s critically important that we understand what went wrong in the financial market institutions that manage the mortgage market, both during the bubble and the crash.

One of those institutions is the mortgage “servicing” industry, which is responsible for collecting payments and handling problems for securitized mortgages. It is at the center for those seeking justice for past wrongdoing, and crucial for writing new regulations to prevent trouble in the future.

But a new obstacle to this has arrived on the scene: federal regulators blocking the release of records they have collected documenting illegal abuses.

A heated exchange broke out at a Senate hearing this week, where Sen. Elizabeth Warren (D-Mass.) asked regulators from the Office of the Comptroller of the Currency and the Federal Reserve why they were not sharing the results of their investigations into mortgage servicing abuses and illegal activities with Congress and the people who were subject to abuses.

These investigations began two years ago, after the OCC found that there were “violations of applicable federal and state law” that had “widespread consequences” in the servicer markets at 14 large banks. This Independent Foreclosure Review (IFR) wrapped up suddenly earlier this year, and it isn’t clear what it found, though the servicers did manage to spend $2 billion on consultants. Paul Kiel at ProPublica found that the review was anything but independent.

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