The biggest obstacle to the housing market – government infighting over who’s in charge

Yeah, we're upset too, Mr. President. But we have to ask- who is in charge here?

Playing football with the ball that is housing

For months, states attorney generals and several federal regulators have been working toward the common goal of establishing hefty penalties to the banks that foreclosed inappropriately. The solution to the robosigning debacle seemed to be near with an agreement in the next few weeks.

But while the dozen or so regulators and over 50 states attorneys passed the football back and forth despite their disagreements, they were all playing toward the same end of the field. Until the Office of the Comptroller of the Currency (really? Remind us who that is again…) decided to play toward the other end of the field goal and during one of the last plays of the game performed a sneaky pass deflection and started running while everyone stood still in confusion.

Flushing months of effort down the drain

The regulators had coordinated to resolve the mortgage probe by punishing banks to the tune of over $20 billion, far above what sources claim the OCC is settling for. The settlement would have helped homeowners foreclosed on inappropriately and let banks contain their litigation risk, with the light at the end of the tunnel being a housing recovery.

The OCC’s pass deflection has them running toward the opposite end of the field where the settlement is much smaller and doesn’t include any loan balance reduction or homeowner assistance.

Reuters probes the probes

Reuters has probed the OCC probers and learned that their reason for splitting from a nationally coordinated effort was not the amount of time it was taking or that there was too much infighting, but because they did a “study” that revealed that only a “small number” of wrongful foreclosure sales have occurred. Reuters has questioned their data and learned that the OCC reviewed only 2,800 foreclosure files, some of which are still in-process, making it difficult to determine if there was a wrongful foreclosure, don’t you think? While 2,800 may sound like a nice round number to you, there were over 1,000,000 foreclosures in 2010 alone and this probe dates back several years. But hey, the OCC is imposing “sanctions,” so they’re still kind of on the same team as the regulators, right?

Crying foul and remembering 9/11

This seems to be a 9/11 moment when several divisions of the government did not work in a coordinated effort and there was a sticky web of reasons that one body (Homeland Security) was born. Is the lending industry headed toward a singular regulatory body of its own? Who is in charge here? No one knows, because the OCC Office of Obscurity can wipe out what all other states and regulators have worked toward with a single pass deflection and lose the game for the entire nation.

Lending will remain THE biggest obstacle to the housing market, but this “piddle contest” as Professor Plath at UNC put it, comes a close second.