Video of today's hearing. Have a listen!
Sen. Elizabeth Warren and Rep. Elijah E. Cummings sent a letter to Fed Chairman Ben Bernanke and Comptroller Thomas Curry, challenging a decision by agency staff not to supply documents related to violations of federal and state law by mortgage servicing companies. This is why we wanted her, and by gum, it's good to have her!
At a meeting yesterday, Warren, Cummings, and Rep. Maxine Waters, Ranking Member of the House Financial Services Committee, were informed by staff from the Federal Reserve and the Office of the Comptroller of the Currency (OCC) that they would not produce any documents relating to specific mortgage servicers involving illegal foreclosures, inflated fees, or fraudulent court documents. Staff from the agencies claimed these documents are the “trade secrets” of mortgage servicing companies and should be withheld from Members of Congress because producing them could be interpreted as a waiver of their authority to withhold proprietary business information from the public.
“We strongly believe that documents should not be withheld from any Member of Congress based on the flawed argument that illegal activity by banks is somehow their proprietary business information. Breaking the law is not a corporate trade secret,” wrote the Members. “As regulators, you identified systemic and widespread abuses two years ago, and concealing important information about these violations limits our ability to fulfill our responsibility to conduct oversight over the actions of mortgage servicing companies and to develop legislation to protect our constituents from further abuse.”
Two years ago this week, the regulators issued a public report announcing that 14 mortgage servicers were engaging in “violations of applicable federal and state law,” that these abuses have “widespread consequences for the national housing market and borrowers,” and that they had identified illegal foreclosures against our nation’s men and women in uniform who are protected by the Servicemembers Civil Relief Act (SCRA). After directing the 14 servicers to hire independent consultants to conduct a review that would identify as many harmed borrowers as possible, in February the regulators terminated the review and finalized settlement agreements with 11 of the servicers.
The request from Warren and Cummings on January 31, 2013, sought documents detailing what the review actually found, such as the number of improper foreclosures, the amount of inflated fees, or the extent of abusive practices by each mortgage servicer. Yesterday, the regulators’ staff refused to provide any documents that would identify wrongdoing by any specific bank.
Today’s letter calls this decision a “mistake.” After citing the legal definition of a “trade secret,” the Members wrote: “Obviously, this definition does not encompass illegal activity. It would be very surprising indeed if mortgage servicing companies argued that their ability to engage in illegal foreclosures and charge inflated fees is a commercially viable plan derived from corporate ‘innovation.’”
The letter also points out that the agencies have clear regulatory discretion to provide Members of Congress with the documents, and that the agencies could protect against a potential waiver by sending a simple cover letter, as other agencies have done routinely. The members conclude: “For these reasons, we hope that you will reconsider your staff’s positions and work with us to achieve a mutually agreeable accommodation that serves both of our interests.”