Q and A: Head of probe says victims of wrongful foreclosure should get compensation
Tuesday, November 16, 2010; 1:23 PM
Iowa Attorney General Tom Miller, who is heading a 50-state investigation into flawed and fraudulent foreclosure practices by big banks and lenders, is scheduled to testify about the issue Tuesday afternoon before the Senate Banking Committee. He also is meeting with officials from the Treasury Department and the White House while in town.
Miller, who recently won reelection to an eighth term, sat down Tuesday morning to discuss the foreclosure investigation with Washington Post reporters. A partial transcript follows:
Q: I'm wondering if you can take us through where everything stands [with the 50-state investigation]?
Miller: [Assistant Attorney General] Patrick [Madigan] and his colleagues have had a chance to have a conference call with all the major servicers and sort of hear their side of the story and start the dialogue on these issues. And, in addition, we've met with Bank of America twice in Des Moines. Those discussions have been, I think, productive. There's still a long ways to go, and still a lot of things to find out and a lot of discussions to have. But as I've said just about every time I've talked about this, the goal once we got in this mess is how can we come out of this mess better off than when we started? We see that as ensuring the "robo-signing" never happens again, providing redress for consumers that were damaged, and then taking a broader look at what's happening in [mortgage] servicing. When you take that broader look, you start to get into loan modification issues and the general competency of the servicing work that's done.
If you can keep a homeowner in the home, and they can make a payment over the long term, [and] if that payment is greater than what would be realized by foreclosure, then the homeowner is better off, the investor is better off, the community is better off and the broader community is better off. ... The servicing companies aren't putting enough resources into servicing in general, and modifications in particular. They've got more than when this started three or three and a half years ago, but still not enough. ... That's just not acceptable. They've got to put the resources in to make sure that the work is done.
Q: So what is Bank of America telling you when they come to Des Moines? The banks have generally said, "We don't see this as a large problem that can't be fixed." What are you hearing from them?
Miller: We've had a very good discussion with them. I really can't say what happens in negotiations. I have to be a little bit careful about that. But to date, we've been engaged with them. We've had two good discussions, and we'll have a number more.
Q: How different are the conversations you're having today [with the banks] different than the ones you've had over the years? Because this is not a new problem for the state AGs, right?
Miller: That's right. That was three years ago, when we had those first discussions. We had the 20 largest servicers for subprime in and met with them. They've certainly come a ways since then. They've added people; they've added resources. But they're not where they should be. They've come a ways, but they've got a ways to go, and that's what this is all about.
I think that one thing we've learned in Iowa is that this whole foreclosure avoidance and modification process is a lot more difficult than anybody realizes. We have a hotline in Iowa that I think people think is probably the best in the country. It's one place to call if you're having trouble with your mortgage, if you're facing foreclosure. ... We think it's working pretty well now, quite well.
But it surprised us how much effort, how much time, how difficult it was to get that whole thing working. So we're dealing with some issues that are very, very difficult, but not insurmountable. And it's been three years now, and now's really the time to get this right. And that's sort of our thinking. It's time to get the whole system right.