A recent headline in the Washington Post--"Regulators flawed in foreclosure oversight"--is the type of headline we've unfortunately become accustomed to. It's yet another sign that the regulatory system had been rendered archaic and unable to respond to fast moving, technology-driven trends.

Three years ago, state bank regulators suspected that some borrowers "might be losing their homes unnecessarily." So they asked big national banks for details about their foreclosure operations. JPMorgan Chase and Wells Fargo declined to cooperate, and the OCC eventually took their side, denying a state request to gather information. The OCC said it was conducting its own study of the matter, but that turned out to be empty rhetoric.

"Instead, the agency relied on the banks' in-house assessments," notes the Post. "These provided no hint of the problems to come until they had tripped the nation's housing market, agency officials later acknowledged." This has left some state regulators angry, understandably.

But, this is not to say that the OCC has been remiss in all areas. It has taken a more aggressive turn as of late. It just didn't foresee massive foreclosure problems, as the issue was never part of the bank examination process. But that's not really the kind of excuse the OCC  will want to parrot, especially given all the signs that the mortgage servicing industry had problems.

For more:
- here's the article

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