Obama Administration's Nolo Contendere in Foreclosure Servicing Crisis

Earlier today, the Obama Administration floated a proposal to address the burgeoning foreclosure servicing crisis. One has to read it to believe it. The Washington Post has the details. I'll provide some of the story's choicer items:

Exhibit A: Federal regulators on Wednesday urged the nation's lenders to verify that paperwork filed as part of the foreclosure process was properly reviewed and to file new documents if problems are found. But regulators also said that lenders should continue as quickly as possible with foreclosures when no problems are found.

Exhibit B: (I)t's not clear whether (the Federal Housing Finance Agency) will play a positive role in cleaning up the foreclosure mess. The regulatory framework largely repeated what regulators have already said or what banks were already doing.

In essence, it tells banks to make sure that documents used as part of the foreclosure were properly reviewed and signed. If they weren't, banks must work with local lawyers for a fix. This might include filing new paperwork that has been properly reviewed, the framework says.

I believe that means the niceties of due process for the foreclosed homeowner can be safely ignored, while the banks and mortgage fixers get a free pass and a "do-over." Don't worry: the foreclosed family might receive an "oops" note in the mail from their mortgage lender. This document, however, probably won't be delivered by a process server.

Exhibit C: "The country's housing finance system remains fragile and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and, most of all, is in the best interests of taxpayers and housing market," said FHFA acting director Edward DeMarco in a statement.

It's heartening to learn that the FHFA is being "fair" to servicers, a number of whom are being investigated by various states' attorneys general for civil and criminal violations of the law. The servicers are made to order to take the fall for the volatile mortgage scandals.

Today's Wall Street Journal named names in the Florida AG's investigation of servicers. There are four principal players in this field in the Sunshine State. Guess how they got their lucrative, politically connected, behind-the-curtain business? They were chosen by Freddie Mac and Freddie Mae representatives. Freddie and Fannie execs were key Democratic Party fundraisers and acceptable faces to the now-restive corporate world. One wonders just how edgy the rapidly escalating foreclosure documentation crisis is making White House operatives.

The corruption runs deep, and touches all of us.