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What's going on w/ NY's Lawsky's agreement w/ banksters on robo signing?

Update and corrections: A Little Night Music has more indepth and correct information about this agreement. See comments below.

NPR had a very brief report that Schneiderman, Correction: make that New York State, has reached an agreement with the delinquent banks, that the banksters have "promised" to look at all the documentation...not sure robo signing will cease.

Update: NPR transcript from above link--


NPR's business news starts with promise from mortgage companies.

(Soundbite of music)

INSKEEP: New York State struck a deal with major mortgage servicers to clean up some of their most controversial practices, that's according to or friends at The Wall Street Journal. The Journal says New York's top financial service regulator is expected to announce a deal with three major mortgage servicing companies, including one owned by Goldman Sachs.

The Journal says that under this deal the companies promise to stop robo-signing, signing off on foreclosure documents without fully looking over the papers in the case, as is legally required.

Companies in New York account for nearly two-thirds of mortgage servicing activity, nationwide.

Original write-up from NPR:

September 1, 2011
Officials in New York have struck a deal with major mortgage servicers to clean up some of their most controversial practices, according to The Wall Street Journal. Under the deal, the companies promise to stop signing off on foreclosure documents without fully looking over the papers in the case, as is legally required.

So, are they being given a get out of screwing up big time free card from NY's AG? Correction: From NY's financial services superintendent, Benjamin M. Lawsky? Or...??

Bears watching.

Under the agreement with the state's financial-services superintendent, Benjamin M. Lawsky, the three firms—Goldman, its Litton Loan Servicing business and Ocwen Financial Corp.—promised to end so-called robo-signing, in which bank employees signed foreclosure documents without reviewing case files as required by law. They also agreed to comb through loan files for evidence they mishandled borrowers' paperwork and to cut mortgage payments for some New York homeowners.

I can't read more as it's behind the WSJ paywall. All emphasis is mine.

Looks like the banksters will be self-investigating and self-regulating?? What is going on with this?

Again: More info in ALNM's comments below.


jumpjet's picture
Submitted by jumpjet on

from the blurb, it doesn't look like Schneiderman is going to be halting any of his investigations.

This could be the banks trying to bargain for a lighter punishment when their full crimes come to light. Furthermore, I don't know all the powers of the New York Attorney General; does his office have the authority to regulate mortgages and the handling thereof?

a little night musing's picture
Submitted by a little night ... on

It was made with Benjamin Lawsky, the Superintendant at New York State Department of Financial Services. Even the excerpt you quoted says this.

And it has nothing directly to do with the AG's investigations. (surely that would have been headline news!)

The quid-pro-quo for Goldman in this agreement is that they get the go-ahead to purchase Ocwen Financial Group. In exchange, they agree not to engage in certain practices (!) and pay Fed penalties and writedown $53 million in mortgages.

Here's the story in Bloomberg.

I really think you need to change this headline. It's terribly misleading, and people are reacting to it as if it were true.

a little night musing's picture
Submitted by a little night ... on

Sale of Goldman’s Subsidiary, Litton, Conditioned on New Servicing Practices

Goldman to Significantly Reduce Loan Amounts for Those Hit by Financial Crisis"

(See the link for the whole press release.)

The important quote:

Importantly, the agreement today is a condition of the acquisition and does not preclude any future investigations of past practices or release any future claims or actions whatsoever.

Please. please, please, change your headline. This is NOT "the NY AG's agreement"

Submitted by lambert on

The question in the title is a good one, and we should watch, but it looks to me like the content really is about Lawsky.

a little night musing's picture
Submitted by a little night ... on

(edited for clarity)
This is not a "get out of jail free" card, it has nothing to do with that.

Goldman wanted to make a certain acquisition and/or selloff (it's an acquisition; I don't know how I got confused about that part) - that part is hazy to me since I don't know all the involved parties and don't have time to research right now. As a condition of their being able to do that, Lawsky's office (which has oversight of such things) has negotiated a whole list of concessions in exchange for giving them the green light, and without in any way interfering with the ongoing investigation and possible prosecution of past practices, and/or possible penalties for past practices. Note the quote I gave in the previous comment.

Here are the conditions they negotiated, quoted from the news release:

The Agreement makes the following changes:

Ends Robo-signing and imposes staffing and training requirements that will prevent Robo-signing.

Requires servicers to withdraw any pending foreclosure actions in which filed affidavits were Robo-signed or otherwise not accurate.

Requires servicers to provide a dedicated Single Point of Contact representative for all borrowers seeking loss mitigation or inforeclosure, preventing borrowers from getting the runaround by being passed from one person to another. It also restricts referral of borrowers to foreclosure when they are engaged in pursuing loan modifications or loss mitigation.

Requires servicers to ensure that any force-placed insurance be reasonably priced in relation to claims incurred, and prohibits force-placing insurance with an affiliated insurer.

Imposes more rigorous pleading requirements in foreclosure actions to ensure that only parties and entities possessing the legal right to foreclose can sue borrowers.
For borrowers found to have been wrongfully foreclosed, requires servicers to ensure that their equity in the property is returned, or, if the property was sold, compensate the borrower.

Imposes new standards on servicers for application of borrowers' mortgage payments to prevent layering of late fees and other servicer fees and use of suspense accounts in ways that compounded borrower delinquencies and defaults.

Requires servicers to strengthen oversight of foreclosure counsel and other third party vendors, and imposes new obligations on servicers to conduct regular reviews of foreclosure documents prepared by counsel and to terminate foreclosure attorneys whose document practices are problematic or who are sanctioned by a court.

Ocwen and Litton are immediately taking steps to implement these servicing practices. Goldman, which is exiting the mortgage servicing business with the sale of Litton, has agreed to adopt these servicing practices if it should ever reenter the servicing industry.

I always believe that banksters can find the teeniest loophole and march a whole regiment through it, but this is on the face of it at least, a great deal for the people. Lawsky seems to be on board with the AG's programme.

I'm really hoping Yves or one of the other econ bloggers I read analyzes this, but it looks good to me.

It also seems to me that the original post was based on a misconception of what this deal was, not just of who did the deal. Such as:

So, are they being given a get out of screwing up big time free card from NY's AG? Or...??

Looks like the banksters will be self-investigating and self-regulating??

No evidence for either of these, not in the least.

And the original post still says that the deal was the AG's, even though you changed the headline.

I hope people will go and read the Bloomberg article I linked and the news release from Lawsky, and whatever else there is written about this based on actually looking at the deal.

a little night musing's picture
Submitted by a little night ... on

What power does the State of New York (in the person of the NY State Banking Department, I guess) have to enforce the conditions of this deal?

I have in mind the many times NYC has given tax breaks to companies in exchange for concessions which never materialized. (Can't find links now and I'm running out of time, so I'll just say I vaguely recall these in relation to construction of luxury housing and things like that, and tax breaks to keep a firm from leaving the city only to see them leave anyway. IIRC the city had no recourse or did not use what recourse it had in these cases. But I could be misremembering... The point is, I wonder how the enforcement would work.)

a little night musing's picture
Submitted by a little night ... on

(I really do have to run, but I want to get this said first!)

Yes, it is important to ask questions about this deal and to try and figure out its implications.

The trouble I see is that it is hard to have a useful discussion of the deal when people start out being angry about something they read in the original post, when that thing isn't even part of the actual deal.

That's why I say that I hope people will read the sources I linked, and others which are based on actual information about the deal.

I absolutely do not think that Lawry's news release is the last word on this. I realize what I wrote could be read that way. I just meant to say that he has provided his office's answer to one of the concerns raised here (and others). I eagerly await other people's analysis.

Quick thoughts about what is important to think about here:

In a way the fact that this deal does not immunize Goldman, etc. is a red herring, even though it's good that it was said (because of course that's the question on everyone's mind). AFAIK Lawry (who is a Superintendant in a part of the state Banking Department, in effect a regulator of banking in NY) could not have given immunity as part of the deal even if he wanted to, without the AG's participation. AFAIK only the AG's office can sign off on immunity from prosecution. (That's why the 50, now 49, AGs are the ones making THAT deal.)

One could ask whether the $53 million in writedowns is significant enough. I don't know, but that's one of the first things I will look into when I have time this weekend. Also, the penalties that they will have to pay. Same question.

There is the enforcement issue I mentioned elsewhere.

And of course, there is the question of whether it's a good thing to have fewer and larger mortgage servicers, which is one outcome of this deal. Goldman had to give up all these concessions in order to make that consolidation happen, but one could ask whether the price was high enough given the societal cost of having fewer and bigger players. I dunno.

There are other questions that can be asked, but let's please look at the actual deal before asking, is all I'm saying.

Submitted by jawbone on

too much on a WNYC local news summary early in the morning. I was suprised about such a thing and really appreciate the input from those who had time to get more answers. I felt it couldn't be that simple, but when I looked around the econ blogs they hadn't dealt with this news yet, no had other news sources.

So, greatly appreciate the follow up, follow through, depth of comments by ALNM.

I went out Thursday on a "brief" errand, thought I'd found a way around our local flooding highway closures, and ended up in a huge traffic jam from detours caused by the Fairfield Passaic River flooding. Lots of wasted hours and gas! My insurance agent's office was closed anyway (shoulda called ahead) due to contamination from flood waters and, more seriously (except for all the damaged paper files and drowned computers), the foundation had been shifted by the flood waters. They were not in an area which has seen floods in living memory, albeit Fairfield has areas which are regularly flooded. Huge mall, Willowbrook, is still submerged as of yesterday's TV video.)

That's my excuse for not getting back to this, heh. And Friday I forgot.