The USA: Blessing The Abuse And The Bullies

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Editor’s Comment: 

Cautiously optimistic in CA

The L.A. Times reports that CA AG Harris has tapped UC Irvine Professor Katie Porter to monitor the mortgage settlement in CA. Normally this would be cause for joy as it is hard to image a better candidate than Professor Porter. She’s smart, she’s knowledgeable, she has been looking at this morass for a long time and she and her close colleagues (such as Professor Adam Levitin) know where the buddies are buried. In addition, the former Elizabeth Warren’s student is a master at working with very large amounts of information, which will be the case here. For a sample of her statistically‑based work see her recently published book “Broke: How Debt Bankrupts the Middle Class”.

But these are not normal times, and hence some are wondering why Professor Porter would accept such a position. So far we can only guess that she may be planning in becoming an eleventh hour mother of all whistleblowers; she may eventually denounce the settlement as unworkable and as the farce that it so far is. We just hope that it won’t be too late by then.

Certainly it is hard to see how, under the current status quo of the settlement, she would be able to ensure that the banks deliver “meaningful relief to California borrowers” (AG Harris’ words), as there is nothing meaningful in the settlement to start with.

Abigail Field, amongst many others, continues to bring us details about the settlement and, well, personally I think that we would have been better off without one. While there are many worrying provisions in that settlement a few really jump out, such as the incredible “error tolerance(s)” therein proposed. Abigail writes:

“Note: You may want to print out table E-1 while reading this, or at least keep it open in another browser window; these metrics are shocking enough you won’t want to take my word for it, you’ll want to verify I’m citing the text correctly.

Now, the table doesn’t come right out and say, we, the federal and state governments of the United States of America do hereby bless the institutionalization of servicer abuse, but it should. To understand why, you need to keep your eye on how the table’s columns are defined. For most issues, the critical columns are C “Loan Level Tolerance for Error” and D “Threshold Error Rate.” Later I’ll talk about the problems in Column F, the “Test Questions.”

When Error Isn’t Error

Loan Level Tolerance for Error, Column C, is defined as:

“Loan Level Tolerance for Error: This represents a threshold beyond which the variance between the actual outcome and the expected outcome on a single test case is deemed reportable” (bold mine; see footnote 1 page E-1-14)

Get that? Any error up to the threshold doesn’t count; it’s not reportable error. Now see footnote 2, which defines “Threshold Error Rate” (Column D):

“Threshold Error Rate: For each metric or outcome tested if the total number of reportable errors as a percentage of the total number of cases tested exceeds this limit then the Servicer will be determined to have failed that metric for the reported period.”

Only “reportable” errors count, and only if enough of those are reported can get a servicer in trouble under the settlement.”

Ms. Field’s post is here (caution: reading it may cause uncontrollable rage): The Mortgage Settlement Lets Banks Systematically Overcharge You And Wrongly Take Your Home

So back to Professor Porter. At this juncture she is probably the only one who really knows why she is getting involved. Certainly as currently proposed (remember, it is not yet final) this “settlement” settles nothing, it adds insult to the injury and certainly will not bring “meaningful relief”.

The L.A. Times article is here: http://www.latimes.com/business/money/fi-mo-banks-settlement-20120315,0,5768422.story

 

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