Not Only did the Federal Regulators Sleep while Foreclosure Crisis Raged

Not only did the federal regulators sleep while foreclosure crisis raged but they preempted state laws in order to usher in the era of too-big-to-fail banks. The signs of the approaching crisis were all along coming through but they looked the other way. The prime target of this criticism is the OCC or Office of Controller of the Currency.

As per federal laws the servicers have to send the borrowers one statement of account per year – even if interest rate increases or additional fees are introduced during this one year.  If the house owner has any problem HUD expects the borrower to register a complaint with the servicer.

If within three months nothing has been done then an appeal can be made to HUD – taking for granted that in the meantime the homeowner has not been evicted! Even if HUD did step in to fix the leak it lacks the authority to enforce touch penalties on these servicers.

The Federal Trade Commission together with Office of the Comptroller of Currency as well as Office of Thrift Supervision has restricted oversight powers over the mortgage worldy. A spokesperson of OTS could refer back to only a single formal action taken by the agency in 2004 against one servicer – Ocwen. No action against any other servicer had ever been taken.

But that does not mean OCC is totally without teeth. As a bank regulator it is renowned for its difficult examinations and for implanting these examiners inside the banks coming under its regulations. Times have changed. The Dodd-Frank reform bill that was passed last July will allow OCC to develop and grow more as it will take in the Office of Thrift Supervision. The latter has the task of overseeing savings and loan institutions under the state.

Nevertheless as a watchdog over foreclosure the OCC has yet to prove its credentials. Many of its critics would have to be won over.  The following lines from the story published in the Post is very telling and critical, "Regulators said they hope to complete a preliminary report [on the latest foreclosure debacle] this month but have not decided whether it will be made public". It is no child’s play to win over public trust.