Anyone expecting a quick and narrow resolution of mortgage servicers' troubles from foreclosure process failures probably hasn't talked to Iowa Attorney General Tom Miller, who heads the 50-state coalition investigating the industry.
In an interview with American Banker, Miller spoke of the tension between the need for a thorough investigation of industry practices and his task force's obligation to act quickly to curtail perceived abuses.
AMERICAN BANKER: Bank executives have frequently described the robo-signing issue and other foreclosure documentation issues as strictly procedural. What's your take?
TOM MILLER: It's a matter of the integrity of the state court process in the 23 states that have judicial processes. You go to court to do something significant, evict someone who previously owned their house, you have to get a court order. And to get that you need to file a summary judgment, with an affidavit necessary to do that. To falsely swear by robo-signing — that's a significant affront to the judicial process. And that's not to be overlooked as a technicality.
AMERICAN BANKER: But would you agree with the industry's argument that people aren't being removed from their homes who shouldn't be?
MILLER: We don't know that for sure. We may conclude that when our investigation is over, but we're still investigating that. And we think that there were a lot of people who were foreclosed on who should have gotten a modification. We're looking at the servicing in general, and the modification in particular, to see if that's working, if there are problems analogous to the robo-signing.
AMERICAN BANKER: There's been some talk about national servicing standards being necessary — the Federal Reserve's Daniel Tarullo made the case for them on the Hill, though he left the issue of preemption up to Congress. What are your thoughts?
MILLER: If they're talking about sort of a minimum federal standard, that's something that might work and be helpful. But if they're talking about preempting the states, I don't think that's a good idea. A foreclosure action is something very local, and something that the states have traditionally controlled. It's very much a local transaction, and should continue to be a fundamental state responsibility to control state litigation. I don't think that there should be a federal standard that preempts state law.
AMERICAN BANKER: Some federal regulators have recently testified that they knew about troubles in the servicing industry and problems with documentation but didn't take action against the companies involved. Have the feds taken too soft of an approach to addressing industry problems?
MILLER: We're working closely with the federal regulators. We have a better, closer relationship with the Obama administration than any in my memory, and I go back five administrations. Treasury, HUD, DOJ, FHA — we are working together. I think it's a very constructive relationship.
AMERICAN BANKER: Judging from existing discussions with servicers and the attorneys general's own work, what time frame do you think would be necessary to conclude your investigation and reach a potential settlement with the industry?
MILLER: We're trying to move as fast as we can. These issues need to be resolved for a host of reasons. But we have to take the time to do it right. We've started talking to the companies, had good meetings with the five largest servicers, and that's been constructive. We are talking months, we are not talking years.
To read the full interview,
