Shaming the Shameless: Why Treasury's Tactics Won't Stop Banks from Misbehaving

Treasury wants to shame banks into treating customers fairly. But it's a curious approach to reforming an industry that apparently has no shame to begin with.
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August seems to have been the month for scoldings at the Treasury Department. In August we felt the chilling winds of shame blowing across what was left of our economy when Assistant Secretary for Financial Institutions Michael Barr said, "I think we've been disappointed... about [banks'] performance in helping people in a timely fashion with the respect they deserve under difficult circumstances."

On Friday, after four months without progress, Barr said, "The banks are not doing a good enough job. Some of the firms ought to be embarrassed, and they will be."

What did shame get us? We got to hear the CEO of Goldman Sachs, the company not only responsible for this fiasco but also profiting from it. "I'm doing God's work", they tell us in a disgusting display of self adulation.

What's changed, that suddenly shame is going to work on the shameless? Have lenders come to the uncomfortable realization that they caused this mess, were bailed out by the same tax payers they've been kicking to the curb, and now it's time to do the right thing? Doubtful.

What we do hear from banks is that they need time to ramp up their "complicated processes" and staff. Raising interest rates doesn't seem to be a problem. My loan jumped to 9.5% on the exact day they said it would. No delay, no mistakes, no misplaced paperwork, no excuses.

Some executives will have you believe that it is a paperwork problem.

"The documents were confusing. Borrowers did not understand the process wasn't closed until the documents came in," Sanjiv Das, chief executive of Citigroup's mortgage unit, said earlier this month. "Even when the documents came in, they were not always complete."

It's hard to believe that enough Citigroup customers are so confused that the entire lending machine is grinding to a halt. Here are the documents required by HAMP: a request form, a tax form, and a pay stub. That and a stamp to mail the stuff are all you need.

There's more to the problem than administrative delays. These banks are all getting billions of dollars of taxpayer incentives to modify loans, but despite that, they continue to abuse and con homeowners.

OneWest took $814.2 million in taxpayer bailout and was called "inequitable, unconscionable, vexatious and opprobrious" by a Long Island Judge who wiped out a $525,000 loan calling out the bank for "harsh, repugnant, shocking and repulsive" acts.

Bank of America, receiving $6.1 billion in bailout funds, has been blamed for a man's fatal heart attack due to stress, and that's just one story.

Ira Glass, of This American Life, interviewed a Marine back from combat in Iraq, who said dealing with his mortgage was the most stressful thing he's been through. That was Chase, receiving $3.4 billion.

Chase continues to give one woman the run around after putting her through five months of trial payments, according to a The New York Times article.

Ocwen Financial Services, getting $656 million, might be the worst. This supposed poster child of loan modifications is gloating to industry rags about their success. You'd think from some of the press releases that they were single-handedly saving Western civilization. CEO Ronald Farris even went so far as to tell NPR that other banks were coming to them for advice.

According to Paul Koches, Executive Vice President, Ocwen has modified 66 percent of its loans to permanent modifications. That's 5,000 loans according to John Prior of, but according to the number is 3,039, and according a report from The Congressional Oversight Panel last month it's closer to 700. But Koches was also bragging about numbers nearing 60,000 in July, so who knows?

I asked Prior in an e-mail where he was getting his numbers and how he got his information. "Got the numbers from Ocwen in an interview with Koches," was the response.

Really!? He got it from the VP of a company that notoriously rips people off and trusted that information enough to write an article?

I should also mention that NPR never asked Farris for any proof of his claims.

Among Ocwen's loan modifications is my own. The process took 13 months of submitting paperwork no less than 15 times, interviews in The Huffington Post, radio interviews, my blog, and relentless phone calls and e-mails to John Tierney, Barney Frank, and Martha Coakley. We are still upside down on our mortgage by about 40 percent. Ocwen's executives may claim to reduce principals and say nice things like:

We roll up our sleeves; we talk directly with the borrower. We find out what their situation is and we provide counseling and basically a complete underwriting of the delinquent loan, perhaps the way it should have been done at the point of origination. - Paul Koches, Executive V.P.

According to Ocwen CEO Ronald Farris' own secretary, Linda Ludwig, Ocwen never reduces principal, despite what their executives are quoted as saying. They actually increased our principal by $20,000.

Belva Davis, of Michigan, with the help of a local activist group also got a loan modification from Ocwen after a year of negotiating. "The strategy included rallies in front of her house, pickets in front of the house of Wachovia/Wells Fargo administrator and huge numbers of telephone calls and e-mails to Ronald Farris the CEO of Ocwen," according to an article in Houserepos.

Ocwen even brags on their web site about a homeowner they helped by giving her free mortgage payments for a year in this article. Sounds pretty good right? What they don't mention, according to a former Ocwen employee, is that they charged her over $20,000 in foreclosure fees on the back end of the loan for a $52,000 home in Florida.

"I don't think they ever intended to do permanent loan modifications," said Margery Golant, a Florida lawyer who previously worked for Ocwen Financial to The New York Times. "It's a shell game that they're playing."

So really, shame is the tactic du jour? That's it? If you really want to see how homeowners are being treated by banks and servicers or whether the first round of shaming them back in August actually worked, read some of the stories from 20,000 members and homeowners at and judge for yourself. And while you're at it, sign their petition telling Congress to get off their ass.

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