One of the more amusing moments of yesterday’s House Financial Services Committee hearings on foreclosure fraud was when the representatives for the loan servicers were asked why they were subsidiaries of the large financial institutions. The link between the servicers and the big banks, mainly caused by a series of mergers, leads to all kinds of conflicts of interest, because it inevitably pairs them up with the originator or trustee of the loan. The servicers had no real answer to this question. Finally, the Wells Fargo representative claimed that it was for “customer convenience,” because some customers had their mortgage and their checking accounts at the same bank.
Everyone’s jaw dropped in the hearing room.
Now Miller is out with a letter, signed by all the top leaders of the House Financial Services Committee, that seriously ratchets up the demands on the Financial Stability Oversight Council. Among other things, it asks the FSOC to use its authority under Dodd-Frank to force the large financial institutions to divest from the loan servicers.