The Washington Post scoops that the feds have opened up a criminal investigation into the foreclosure scandal, “examining whether financial firms broke federal laws when they filed fraudulent court documents to seize people’s homes.”
The Obama administration’s Financial Fraud Enforcement Task Force is in the early stages of an investigation into whether banks and other companies that submitted flawed paperwork in state foreclosure proceedings may also have misled federal housing agencies, which now own or insure a majority of home loans, according to these sources.
The task force, which includes investigators from the Justice Department, Department of Housing and Urban Development and other agencies, is also looking into whether the submission of flawed paperwork during the foreclosure process violated mail or wire fraud laws. Financial fraud cases often involve these statutes.
— I love how Michael Hiltzik and the Los Angeles Times smack back after having a former governor (Gray Davis) criticize a column Hiltzik wrote on the obscenely paid Ray Irani of Occidental Petroleum, whose a Davis client and pal, of course.
Yes, I owe an apology for that column … to my readers. I didn’t do justice to Ray Irani’s compensation. It’s worse than I let on.
I mentioned that Irani’s compensation could exceed $56 million this year, but not that it has been estimated at more than $850 million over the last decade. Or that his payout has averaged three times that of comparable companies in the oil and gas industry. Or that Oxy’s pay practices put it in the cross hairs of activist investors, in part because the incentive thresholds that turbocharge Irani’s payouts have been set so low.
And Hiltzik has a common-sense suggestion on how to ameliorate the executive compensation problem: Quit incentivizing it.
Taxpayers, who subsidize these huge payoffs through the tax deduction corporations take for them, have a remedy: Close the loophole allowing companies to deduct executive compensation in excess of $1 million as long as the overage is tied to executive “performance”…
So here’s a suggestion: Allow companies to deduct $1 million in executive pay, period.
— Meantime, the Journal had a good look this weekend why the mortgage mess isn’t limited to robosigners.
As the foreclosure process comes under nationwide scrutiny, judges are questioning how servicers calculate amounts owed on loans. Some borrowers claim they lost their houses because of bungled payment processing and accounting. And there are growing worries about whether important mortgage documents were recorded properly, especially on loans packaged into securities.
At the heart of many of the current problem is that mortgage servicers’ business model isn’t suited for the high delinquency rates of the housing crisis and the pressure to rework troubled loans. It is hard for mortgage servicers to make money by doing anything but pushing paperwork through the pipeline.
Even before the mortgage meltdown, the servicing industry “was plagued with problems,” such as servicers charging unauthorized or excessive fees and making false or unsubstantiated statements about how much borrowers owed, says David Vladeck, head of the bureau of consumer protection at the Federal Trade Commission, which has brought several recent cases against servicers.
And the Journal has some good anecdotes from its own reporting. Nice work.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.