Think Washington is going soft on the banks again? You have company – at the FDIC, no less.
The three primary federal bank regulators – the Federal Reserve, the Office of Thrift Supervision and the Office of the Comptroller of the Currency – issued enforcement actions Wednesday that order the biggest U.S. banks to clean up their foreclosure mills.
The move, affecting 14 institutions and promising fines at some undetermined point down the road, is the biggest federal move against the banks in the foreclosure crisis.
But the Federal Deposit Insurance Corp. – which oversees state-chartered banks outside the Fed system and runs the federal deposit insurance fund – says the crackdown doesn’t go far enough. It wants regulators to go back and figure out who the banks have wronged with their dingbat approach to mortgage recordkeeping and their addiction to profit-padding cost cuts.
“A thorough regulatory review of loss mitigation efforts is needed to ensure processes are sufficiently robust to prevent wrongful foreclosure actions and to ensure servicers have identified the extent to which individual homeowners have been harmed,” the FDIC said.
The statement indicates some displeasure with the feds, and no wonder. Consider the release issued by the OCC, which has long been seen as soft on the banks. It blithely suggests that the enforcement actions that haven’t even been fully elaborated — how big will those fines be? — will accomplish everything short of handing the mortgage market a new toaster.
But the FDIC doesn’t see it that way, and unlike the other regulators it has some semblance of credibility. For starters it is headed by Sheila Bair, the one Washington honcho who doesn’t seem to have spent the past decade drinking the big bank Kool-Aid.
So when the FDIC suggests that the current arrangements are unsatisfactory, it is worth a listen:
That’s not all. The FDIC takes issue with the OCC’s claim – very much in line with the one made by the banks, at least until they are confronted with evidence to the contrary –that “based on the sample of files reviewed by OCC examiners, borrowers in the sample were seriously delinquent at the time of foreclosures and servicers held the notes and documents required to foreclose.”
The FDIC says instead:
Though most foreclosures are probably legitimate, it beggars credulity to claim, as the OCC does, that there have been no material mistakes by the banks. But then, you get the idea sometimes that the regulators don’t think an awful lot about their credibility.
Also at Fortune.com:
- Fed to fine banks for ‘misconduct’
- BofA gets serious on foreclosures
- BofA’s unfunny foreclosure tricks
Follow me on Twitter @ColinCBarr.