I got an email the other night from one of my readers.  It said…

“I was hired as one of those “Independent File Review Specialist” at a company called Promontory working on Wells Fargo Bank. I have 15 years industry experience in all facets of the mortgage & title industry, and just needed a job at the moment.  I must say the whole project is a mess, and a terrible joke on the victims of foreclosure and the American people. It’s a total sham.”

No kidding, I said to myself.  Or, as Yves Smith would say… “Quelle surprise.”  The email continued…

“I have found errors that should be moved up through the ranks, but am told “quit digging so deep”…”put your shovel away”…Focus on the questions “in scope”… The review forms are set up so no harm could ever be found. It’s equivalent of an attorney presenting his case to a judge with just 20% of the evidence.”

Well, that can’t be good, right?  He went on…

“I would also like to mention that I was brought in through a temp agency…..some of the people brought in with me do not know the difference between a truth in lending statement, and a note. It’s a shame, these are your reviewers!!! The supervisors don’t want any trouble…they are mostly temps too, just trying to get a promotion to full time. Does this sound like a fair and impartial review to you? Since we’re temps I suppose that’s impartial, not to mention they made us “affiant notaries” so we can so-called “notarize each others reviews.”

Doesn’t sound “fair and impartial” in the least, now does it?  But I do like the ability to notarize each other’s reviews.  That sounds handier than a pocket on a man’s shirt.  He closed by saying…

“The foreclosed victims don’t realize if they do not provide specific dates on the intake forms… their complaints are considered “general comments” out of scope. They should specifically ask for a “full file review” and hopefully their info has not been scrubbed or purged… I could go on and on, but I just felt I needed to share this.”

And in my opinion, you’ve done a very good thing.

Our insider says he was hired by Promontory Compliance Solutions, LLC to do work on the Independent Foreclosure Review for Wells Fargo Bank.  The company’s Website describes itself as follows:

Promontory excels at helping financial companies grapple with and resolve critical issues, particularly those with a regulatory dimension. Taken as a whole, Promontory professionals have unparalleled regulatory credibility and insight, and we provide our clients with frank, proactive advice informed by evolving best practices and regulatory expectations.

Promontory is a leading strategy, risk management and regulatory compliance consulting firm focusing primarily on the financial services industry. Led by our Founder and CEO, Eugene A. Ludwig, former U.S. Comptroller of the Currency, our professionals have deep and varied expertise gained through decades of experience as senior leaders of regulatory bodies, financial institutions and Fortune 100 corporations. 

The company’s founder and Chief Executive Officer is Eugene Ludwig.  According to the company’s Website…

“Gene, the Founder and Chief Executive Officer of Promontory Financial Group, is a trusted adviser to many of the world’s leading financial companies. He is widely recognized as a farsighted thinker on the most pressing issues confronting financial services. Before founding Promontory, Gene served under President Clinton as U.S. Comptroller of the Currency, the head of the federal agency responsible for supervising the preponderance of U.S. banking assets. He went on to become Vice Chairman and Senior Control Officer of Bankers Trust/Deutsche Bank.”

“As Promontory’s Chief Executive Officer, Gene provides hands-on leadership and direction to all our global offices.”

Now, I am not suggesting that either Mr. Ludwig or Mr, Moses are involved in the OCC Complaint review process in any way, and neither is the insider who works there.  But, they do own the company and as such, they are ultimately responsible for what goes on there.  It is my most sincere hope that they fix whatever is apparently broken about the independent review process.

Now, I realize that no one was terribly impressed with the OCC’s independent review process when it was announced, and a big part of the dissatisfaction was based on the apparent lack of true independence of the company’s that were being hired to do the reviewing.  But, that didn’t bother me as much as it did others because I think it’s pretty much impossible to find a company in this country capable of handling the requirements of the review that doesn’t already have a relationship with the large banks.

I thought, Gretchen Morgenson, did a darn fine job reporting on the various opinions of the program’s inadequacies.  For example, in her column that appeared in the New York Times on Christmas Eve last year, she wrote: “Nye Lavalle, a foreclosure fraud expert who began warning bank executives about bad lending practices back in 1999, is troubled by this situation.”  Nye had told Gretchen: “This review process is a wink-wink, nod-nod.”  (By the way, I just did a Mandelman Matters podcast with Nye and Max Gardner, so look for that this weekend.)

Yves Smith on Naked Capitalism also pummeled the obvious inadequacies of the OCC’s process, pointing out flaws including the limited years being reviewed, 2009 and 2010, and borrowers asked to sign some sort of limited release of future claims.  Yves referred to it as, “yet another Obama Administration pretend we are helping ordinary citizens when we are in fact helping the banks” scheme.”

~~~

• File reviewers are only allowed to look at the “last added and removed” dates.  This is the last time the file was opened by a servicing representative before it was removed/referred to attorney for foreclosure.  So they are only getting to review the file at the very end, meaning that’s the only data that’s being examined to determine if anything was done incorrectly.

• File reviewers get the intake form, which is what the homeowner submitted, and use it to answers questions on Promontory’s form, with drop down options depending on boxes checked. However, if there are no specific dates provided by the homeowner regarding the circumstance being described, the policy is that it’s considered “General Commentary’ it is “not in scope.”  So, it’s disregarded in its entirety.  The thing is that on the official form sent out to homeowners by the OCC, there is no instruction to provide dates for each assertion, with the exception of one of the questions where it says, “if possible provide dates.”   As a result, I would suspect that the vast majority of complaints will be disregarded as “General Commentary.”

Independent Foreclosure Review Form

• When a file reviewer looks for payment history, oftentimes it comes up as “image not available” or “this time period not available.”  They say that they keep the payment history on microfiche, so he’s told to order a sub-process to get payment history from God knows where, and it takes weeks.  So, whoever gets his request knows exactly what he wants to look at any why, and therefore has the opportunity to scrub the data, to eliminate escrows misapplied or not applied or any inappropriate fees.

• Supervisors told his entire group that “Wells Fargo had submitted over 10,000 files to Promentory.  Only 4 were found to be in question, and upon final review by Wells, no harm was found.”  So, 10,000 homeowners submitted their complaints and all 10,000 were deemed to be models of perfection.

• Every problem/error he has found and reported to supervisors, he has been told such things as: “put your shovel away; stop digging; if you look long enough at anything you’ll find something; put your blinders back on and get back to work.”

• He also says that the questions on Promontory’s form are worded in such a way that it makes it very difficult to ever find fault.  For example, by using compound questions, he is often told to answer “no,” when the first part of the question would be a “yes.”

• They made the file reviewers, “affiant notaries,” so that they can so-called “notarize each others reviews.”

Here’s a copy of the actual agreement between Promontory and Wells Fargo… it’s 137 pages long, incredibly detailed… SMOKE SCREEN.
Wfb Promotory Agreement

Okay, there’s more… but that’s enough for right now.  I’d like to make a point here.

Everyone knew the OCC’s review process was a stacked deck, but I was willing to let that go, which apparently proves that I’m an overly trusting idiot.  Wait… that wasn’t my point.

My point is that for Wells Fargo, a stacked deck apparently wasn’t good enough.  In a game against homeowners, Wells had to have all the cards and then be allowed to deal them without anyone looking so that they could just lay down Royal Straight Flush after Royal Straight Flush.

I mean, basically EVERYONE thinks of the OCC as being a regulator that’s straight out of a Marx Bros. movie.  It wouldn’t matter what the OCC said at this point, no one has any confidence in them to be able to do anything effectively, in terms of regulation.  Personally, I’m not banking at anything regulated by the OCC anymore.  It’s become clear that they’re either so entirely bought off, or so entirely incompetent that they’re actually scaring me.

Want to know how bad it is?  The OCC makes the SEC look like the Gestapo of Wall Street, right?  Exactly.

But, I want to make sure I say this… I don’t believe for a moment that Promontory implemented such a system and set of policies without Wells making it clear that it’s what the bank wanted.  It would be impossible for Promontory to do it on their own… Wells had to be in the drivers seat here.  And that stinks.

Let’s just do a quick recap here… it all started with robo-signing making headlines in September of 2010.  GMAC was busted by Jeffrey Stephan’s deposition by attorney (and good friend of mine), Tom Cox of Portland, Maine.  Within days, other banks were feigning shock and announcing “self-imposed moratoriums,” so they could ascertain to what degree they might unknowingly be doing it too.  It’s really kind of hysterical to think about it today, right?  I mean, in light of what John O’Brian, Jeff Thigpen, and most recently San Francisco has brought to light?

Not that I ever had any doubt… I knew it was ubiquitous from day one.  Why, because if you’re a bank… then robo-signing is simply not an idea that appears on a list with other ideas.  No one sitting around the conference table on the 32nd floor says:

“No, go back one slide… I like the one where we have everyone sign Mickey Mouse.  Yeah, let’s go with that.”

I even wrote a song about it when it was revealed that GMAC had not stopped robo-signing even after they had been exposed and then told not to do it anymore.  I guess, Massachusetts Attorney General Martha Coakley was the last straw and GMAC picked up their sandbox toys and stormed out of the state in a huff.

So, most of the banks stopped foreclosing so they could do their own internal investigations… okay, it was ridiculous… but it happened.  And after a couple of weeks, they all started back up again, or that’s what they said anyway, having investigated without finding a shred of evidence that anything was amiss.

Except Wells Fargo, remember?  I sure as heck do… I never forget a fake.  While BofA and JPMorgan were voluntarily suspending foreclosures pending their own investigations, Wells Fargo was assuring the marketplace that it was certainly not their problem and that there was no need for them to even slow down, let alone stop foreclosing.  They were down right dismissive about the whole thing, which is what made what happened next so great.

Does anyone know how to pronounce “Xee Moua?”  (Lord, this is fun.)  Yes, in a deposition of Xee Moua, just two weeks later on October 14, 2010, she said she signed as many as 500 foreclosure related papers per day on behalf of Wells Fargo, and that the only information she verified was that her name and title were spelled correctly.  When the lawyer asked whether she checked the amount owed by the borrower, she said, “I do not.”

And if memory serves, Wells Fargo’s response was… “No comment.”  To which I replied, “Hahahahahahaha.”

But, I”m not laughing about what’s going on a promontory Compliance Solutions on behalf of Wells Fargo Bank.  Because it’s not the least bit funny.  The OCC, the Federal Reserve and the FDIC said they had all investigated… and at the conclusion of those investigations, the OCC issued “consent orders,” and we all read them.  And they said, among a whole lot of other things, that the banks we employing “UNSAFE AND UNSOUND PRACTICES.”  And the CEOs and other senior executives all signed those “consent orders.”

And then months went by, and finally the OCC announced that the time had finally come for some small measure of justice to be meted out to the homeowners who had been victimized by the banks’ “unsafe and unsound practices.”  The homeowners wouldn’t have to sue the banks, the OCC would make certain that the banks were made to compensate those they had wronged.

And even though I, like everyone else, didn’t have much faith and recognized that the deck was stacked as I mentioned above, I told people they should not just ignore it out of hand.  I told my readers that I didn’t believe they should asume that no relief would be possible… it sure sounded like the OCC meant business.  It couldn’t hurt anything, and maybe… they’d get something out of it.  I know… the review’s aren’t exactly “independent,” but still… I think it’s worth doing.

And Wells Fargo… you should know something about me.  My readers trust me.  Because I never lie to them.  And I take that trust very seriously.  They also ask my opinions on things, and tend to think that opinion is right, especially about something like this.  And yet, after three and a half years and more than 600 articles… long articles, I know, I know… you, Wells Fargo made me wrong.  So, to my readers I apologize, I had no idea that Wells Fargo Bank would even contemplate these sort of deplorable  acts.

You had everything in your favor, but you couldn’t even play it fair under those circumstances.  I’m done with you.  Doesn’t Warren Buffett own part of you?  What say you Oracle of Omaha?

“It takes 20 years to build a reputation and five minutes to ruin it.  If you think about that, you’ll do things differently.”

Who said that, Mr. Buffett?  That would be you, sir.

Well… the way I see it, Wells Fargo has deceived the victims of the bank’s unsafe and unsound practices, as determined by an investigation by the OCC, the FDIC and the Federal Reserve, by at least attempting to deprive them of what they were promised.  I have nothing else to say.  It’s not funny.  Not at all.

Want to know something?  If I got caught doing something like this… I’d probably leave the country.  I’m not saying anyone else should do that, but I would be so ashamed… oh, wait… I just realized something… if I got caught doing something like this, I’d be arrested and thrown in jail.  That’s right, I wouldn’t have to worry about being ashamed.  Whew… I didn’t know where I was going with that for a moment.

What follows is a podcast featuring the “whistle blower”… the anonymous independent file reviewer working for Promontory on the Wells Fargo Bank account that reached out to us because he was fed up.  I verified his identity and spoke with him at length.  His voice has been disguised in order to protect his identity.  Turn up your speakers and click play… it’s fascinating and terrifying and sickening all at the same time.

I had to modify his voice to protect his identity, so it may be difficult to understand him right in the beginning for a few seconds, but you’ll adjust so stay with it and you’ll hear him.  Also, the whole thing is about 15 minutes long, so I hope you stay with it until the end because I included a recently recorded song written and produced by my good friend from Northern California, Denny Armstrong.  It’s good and very uplifting… in a patriotic sort of way,

There will be more to come in the days ahead.

 Mandelman & Field out.