Here’s what you helped us to do. Hoisted from comments:

Noreen Evans says:
May 9, 2013 at 10:50 am
Yves, I wrote the Homeowners Bill of Rights, along with 2 of my legislative colleagues. The major sticking point was how the legislation would be enforced. We who wrote the bill felt strongly that the homeowner should have some ability to enforce the law. Without the ability to sue the foreclosing institution, the legislation had no teeth. And without the ability of the homeowner to seek attorney’s fees, the homeowner would likely have no legal representation. Glad to see the legislation is working as intended. However, one of the problems we now have is that now our courts are severely underfunded so even if the homeowners can sue, they may never have their day in court. Anyway, thank you for staying on top of this issue. Could not have done this without the work you do.

And keep in mind, this isn’t “work you do” in the personal sense. Most of what I’ve learned and written about on the mortgage and foreclosure beat has come from readers. Some have educated me about the intricacies of the law, some told me about the horrors they’ve faced in dealing with abusive servicers and clueless or captured judges, and some have stepped forward to act as whistleblowers. And of course, many of you have also helped make this effort possible via your financial contributions to this site.

So remember: We’ve helped save peoples’ homes, though our little corner of the universe.

By Abigail Field, an attorney and writer

When the National Mortgage Settlement was announced, I called it an enforcement fraud because every major law enforcement entity in the country signed off on letting banks overcharge people, use fake documents and otherwise abuse homeowners with impunity, so long as they didn’t do it too many people for six straight months. Pigs could get fat, hogs would get slaughtered. (The legalese is in the settlement is “threshold error rate.”)

Or not; the maximum penalty for six months of too many violations was $1 million. Hard to see a deterrent effect of any kind in $1 million when the enforcement population is five of our biggest banks. (Sure, if the banks were really really bad in the same way for four total quarters the penalty could then be $5 mil, but c’mon, the settlement itself was more than 1000x that number, and the settlement didn’t drive change, it produced “threshold error rates.”)

And when this deal was done, it had Eric Schneiderman’s signature on it, something he gave for a task force that was obviously staffed to fail, as I noted at the time. But now it seems he’s got buyer’s remorse.

Now that that A.G. Schneiderman’s learned that Bank of America and Wells Fargo have failed to service 339 New Yorkers according to the standards dictated by the Settlement, he’s served notice he intends to sue. Not for money; for “equitable relief.” Though I’ve not seen a filing, I imagine if he actually will seek an injunction to get Wells and BofA to start complying with (specific performance of) the four servicing standards Schneiderman is targeting in his press release:

1. Borrower must receive written acknowledgement of receipt of a loan modification application within 3 business days or receipt.

Note, I didn’t find a metric to measure compliance with this. (Metrics in Table E-1 here.)

2. Servicer must notify borrower of all missing documents or deficiencies in the application within 5 business days of receipt of the borrower’s initial loan modification application.

Metric 6.b.i. measures compliance with this; 5% is the “threshold error rate.” I’ll bet that the 210 Wells violations, and the 129 BofA ones–collected over a year–are many fewer than 5% processed by either bank in a given quarter. So even if AG Schneiderman’s right, these violations alone wouldn’t be enough to trigger the monitor to take action.

3. Servicer must give borrower 30 days to submit missing documentation or correct a deficiency.

Same metric, same “threshold error rate.”

4. Servicer must make a decision on a complete loan modification application within 30 days.

Metric 6.b.ii measures this, and its threshold error rate is 10%.

To be fair to Schneiderman, the metrics are irrelevant from his perspective. He thinks he can enforce the servicing standards as presented in the glittery golden exhibit A. That is why his letter to the monitoring committee focuses on the standards in A, not the metrics in E.

I hope he’s right about that; I’m not sure. The Consent Judgment has language for both sides. Section II, top of page 3 says: “Defendant shall comply with the Servicing Standards, attached hereto as Exhibit A, in accordance with their terms and Section A of Exhibit E, attached hereto.” That part of Exhibit E has to do with the timeline for implementation. So far, so good for Schneiderman.

But then “Part IV. Enforcement,” at page 4 says “The Servicing Standards and Consumer Relief Requirements, Attached as Exhibits A and D, are incorporated herein as the judgment of this Court and shall be enforced with the authorities provided in the Enforcement Terms, attached hereto as Exhibit E.” That makes it sound like specific performance of A is defined in E.

Also troubling for Schneiderman is IX.A.2 of Exhibit A, a subsection under “IX. GENERAL PROVISIONS, DEFINITIONS, AND IMPLEMENTATION”:

2. In the event of a conflict between the requirements of the Agreement and [law or contract] … such that the Servicer cannot [comply with both without risking penalty], Servicer shall document such conflicts and notify the Monitor and the Monitoring Committee that [law or contract trumps the settlement]. Any associated Metric provided for in the Enforcement Terms will be adjusted accordingly.

That is, when Exhibit A talks about implementation of its standards, it references the metrics.

I’d love to hear from experienced litigators what they think “specific performance” means under the settlement–compliance with A or E?

What Schneiderman Can Get By Suing

Either way, here’s what Schneiderman can sue for:

Equitable Relief. An order directing non-monetary equitable relief, including injunctive relief, directing specific performance under the terms of this Consent Judgment, or other non-monetary corrective action.

At first blush it looks good: Schneiderman can go to the D.C. District Court and ask for an injunction ordering BofA/Wells to specifically perform–meaning live up to the letter–of the terms of the Consent Judgment. (See Exhibit E at J2 and 3 here.)

For a best case look, let’s assume Schneiderman can enforce Exhibit A without regard to Exhibit E. Let’s assume A.G. Schneiderman goes to D.C., gives a D.C. District Court Judge his documentation of the 339 violations, and promptly gets an injunction ordering specific performance of the four the standards in Exhibit A he’s focused on, without regard to the metrics. What then?

Well, either Wells/BofA suddenly overhaul their operations in a way they failed to do when they were facing down all 50 AGs and the Department of Justice, or they keep on keeping on. I’ll bet on the latter. In that case, presumably AG Schneiderman will find it reasonably straightforward to document more of the same kinds of violations. That is, he will be able to prove that Wells/BofA is in contempt of the injunction. What then?

I guess it depends on things not yet known, such as: will any bank bigwigs be named individually in the injunction, and thus at personal risk of contempt? Who will the judge be?

The law of civil contempt means that if the judge agrees Schneiderman can enforce Exhibit A without regard to E, and if the judge is genuinely interested in coercing compliance, the judge can. See this recitation of the standard in a 2011 U.S. District Court civil contempt order (admittedly Florida, not D.C.; anyone know if it’s dramatically different?):

In fashioning a remedy or sanction for civil contempt, a court has broad discretion, measured solely by the ‘requirements of full remedial relief.’” U.S. v. City of Miami, 195 F.3d 1292, 1298 (11 Cir. th 1999) (quoting Citronelle-Mobile, 943 F.2d at 1304). For example, a court may impose a coercive daily fine, a compensatory fine, attorney’s fees and expenses, and coercive incarceration. See U.S. v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947); see Smalbein >v. City of Daytona Beach, 353 F.3d 901, 907 (11th Cir. 2003). “In establishing the amount to impose, the court must consider several factors, including the character and magnitude of the harm threatened by continued contumacy, the probable effectiveness of any suggested sanction in bringing about compliance, and the amount of the contemnor’s financial resources and consequent seriousness of the burden to him.” Matter of Trinity Indus., Inc., 876 F.2d 1485, 1493-94 (11th Cir. 1989).

If the D.C. Circuit standard is similar, the judge has the power to coerce the banks to comply with whatever the judge deems appropriate–Exhibit A or E. If E, it’s not clear that a violation can be proved on what Schneiderman alleges. But assuming Schneiderman gets an injunction, documents non-compliance, and seeks contempt, would a judge be coercive? Would the judge order a high daily fine, or simply a “compensatory fine” that’s as arbitrary and useless as the checks from Rust Consulting?

Will Schneiderman Be Allowed to Sue?

Before Schneiderman can sue, he has to give the monitoring committing a chance to take over the action, which is a kind of lawsuit right of first refusal. The Committee, now in receipt of Schneiderman’s notice, has three weeks to decide whether or not to sue. If they say no, he has to (inexplicably) wait another three weeks before suing. So it may be 42 more days before the injunction is requested. (See Exhibit E at J2 here.)

What does it mean if the Committee decides to bring the suit? Is that more or less potent than Schneiderman going alone? People with more political insight would know better; I wouldn’t assume that the Committee taking the suit over is good, but sure, it could be. I’d rather see a bunch of AGs join Schneiderman’s suit and bring their own cases against the other three big banks that he could join. Enforce the 304 servicing standards a handful at a time. (Again, if Exhibit A is the standard; if it’s Exhibit E it’s not worth it.)

The Bottom Line

It’s really hard to see how this effort–even if A.G. Schneiderman triumphs–leads to the kind of systemic change that was possible when all of the liability for the banks’ bad acts was still on the table. You know, pre-settlement, when A.G. Schneiderman and a few other Democratic A.G.s looked like they were going to stand up for America and insist on a meaningful deal.

Consider, the most that can come of this is two of the five banks complying completely with four of the 304 Servicing Standards.

I’m not trying to trash this injunction effort; at least it brings the banks’ continuing bad acts, their seemingly constant bad faith, and the impotence of the enforcement fraud settlement back into the public eye. And maybe the threatened suit will even do some good for some New Yorkers. But it’s hard to be confident that this suit is the most effective way to be taking on the banks.

For example, the settlement’s liability release doesn’t cover all these new bad acts. When the SEC finds new acts in violation of prior injunctions, it typically brings new (albeit equally ineffective) enforcement actions. Maybe AG Schneiderman could use the new bad acts to bring a meaningful, new enforcement action. Or maybe there’s a different genre of banker bad action that could lead to more meaningful penalties, drive business model change and put bankers in jail.

I wish I could get excited about this threatened lawsuit. Just like I wish that watching SchoolHouse Rock’s I’m Just A Bill and Preamble didn’t make me cry. And yet I let my preschoolers watch them because I want them to grow up believing in the America that can be, if we Americans bring the transnational corporations and their parasitical executives to heel. It’s been done before, and can be done again. But deals like the National Mortgage Settlement, with all those law enforcers’ signatures, show that this President and this Congress aren’t going to do it.

By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet

Imagine you’ve just landed a job with a big-time retailer. Your task is to load and unload boxes from trucks and containers. It’s back-breaking work. You toil 12 to 16 hours a day, often without a lunch break. Sweat drenches your clothes in the 90-degree heat, but you keep going: your kids need their dinner. One day, your supervisor tells you that instead of being paid an hourly wage, you will now get paid for the number of containers you load or unload. This will be great for you, your supervisor says: More money!  But you open your next paycheck to find it shrunken to the point that you are no longer even making minimum wage. You complain to your supervisor, who promptly sends you home without pay for the day. If you pipe up again, you’ll be looking for another job.

Everardo Carrillo says that's just what happened to him and other low-wage employees who worked at a Southern California warehouse run by a Walmart contractor. Carrillo and his fellow workers have launched a multi-class-action lawsuit for massive wage theft (Everardo Carrillo et al. v. Schneider Logistics) in a case that’s finally bringing national attention to an invisible epidemic. (Walmart, despite its claims that it has no responsibility for what its contractors do, has been named a defendant.)

What happened to Carrillo happens every day in America. And it could happen to you.

How big is the problem?

Americans like to think that a fair day’s work brings a fair day’s pay. Cheating workers of their wages may seem like a problem of 19th-century sweatshops. But it’s back and taking a terrible toll. We’re talking billions of dollars in wages; millions of workers affected each year. A gigantic heist is being perpetrated against working people: they’re getting screwed on overtime, denied their tips, shortchanged on benefits, defrauded on payroll, and handed paychecks that bounce like rubber balls. A conservative estimate of unpaid overtime alone shows that it costs workers at least $19 billion per year.

The laws protecting workers are grossly inadequate, and wage thieves go unpunished. For giant companies like Walmart, Citigroup and UPS, getting fined is just the cost of doing business. You could even say that they're incentivized to cheat because punishment is so unlikely, and when it happens, so light. The protections we used to take for granted, like the right to receive at least the minimum wage, the right to workers’ compensation when hurt on the job, and the right to advocate for better working conditions, are nothing more than a quaint memory for many Americans. Activist Kim Bobo, author of Wage Theft in America, calls it a "national crime wave."

The sheer scope of the problem is jaw-dropping, sweeping across key industries and inflicting massive damage on individuals and society as a whole. In 2009, the National Employment Law Project (NELP) released a ground-breaking study, “Broken Laws, Unprotected Workers,” which found that in America, an honest day’s work is frequently rewarded with theft and abuse. A survey of over 4,000 workers in Chicago, L.A. and New York found that minimum and overtime violations were rife, and any attempt to complain or organize was swiftly met with punishment. Among the revelations:

• 26 percent of low-wage workers got paid less than the minimum wage.

• 76 percent of workers toiling over 40 hours were denied overtime.

• Workers lose an average of $2,634 a year due to these and other workplace violations.

Who gets cheated?

Women, minorities, immigrants, and workers at the bottom of the wage scale are hardest hit, but wage theft is thriving across the employment spectrum.

People hired for jobs like yard work and domestic services in which the employer pays cash are denied social insurance like Social Security, and often what’s paid doesn’t add up to minimum wage. Some employees are paid for piece work, like the number of shirts produced in a garment factory, and get cheated when the tally falls below minimum wage (that’s one of the things that’s alleged to have happened to Carrillo). Another common form of theft is the “last paycheck” scam in which a worker is either fired or quits and finds that her final wages are withheld.

Low-wage tip workers are frequently the victims of theft in which the boss illegally keeps tips or makes you pay for your uniform or a ride to the job site. Restaurants are infamous for paying wages below the legal minimum; some charge a fee to convert credit card tips into cash, while others simply steal tips outright. When I was in college, I waited tables at a restaurant where the manager required the waiters to turn over tips at the end of the day, ostensibly so a certain percentage could be distributed among the cooks and other staff. I thought my manager was doing something to create fairness. Actually, he was stealing tips.

Then there’s the payroll fraud scam. Misclassifying workers as independent contractors means the business doesn’t pay overtime, employer contributions to Social Security and Medicare, or unemployment insurance. Sometimes bosses misclassify by mistake, but often they do it knowingly. Temporary and seasonal workers are especially vulnerable. The construction and trucking industries are notorious offenders, but payroll fraud impacts people like engineers, financial advisers, adjunct professors, and IT professionals. It doesn’t matter if you have agreed to call yourself an independent contractor, you may not be under the law.

Two tests are commonly used to determine your status: the Department of Labor “economic reality” test and the IRS “Right to Control Test.” These tests consider questions like: Do you set your own hours? Can you make a profit or loss depending on how you do the job? Is the job contracted for a specific time period?  Unfortunately, various federal and state entities have their own criteria, creating widespread confusion. The independent contractor issue is one of the fastest growing areas of litigation, with class actions by independent contractors jumping by 50 percent in 2010.  Congress has introduced bills to deal with this problem, but they tend to die in committee.

You might think that joining the managerial ranks would protect you from wage theft. You would be wrong. Some people are given titles as managers so they can be forced to work overtime without extra pay. Managers pressured to “improve their numbers” sometimes resort to falsifying employee records. Others deny breaks or deduct the break from the workers’ wages. Walmart has engaged in so many of these practices that researcher Susan Miloser of Washington & Lee Law School refers to retail wage theft as a result of managerial strain the “Walmart Pinch.”

How did we get here?

The world of work in America has fundamentally changed in the last 30 years, and not for the better.

In her paper, “Picking Pockets for Profit,” Susan Miloser traces a struggle for protection that began over a century ago with the public outcry over brutal workhouses where recent immigrants, women and children were paid substandard wages. Massachusetts was the first state to enact minimum wage legislation in 1912. Then came the Great Depression, and President Franklin Roosevelt responded with New Deal legislation that included the Fair Labor Standards Act pushed by his labor secretary, Frances Perkins. One of the key things the Fair Labor Standard Act did was ensure a minimum wage under the theory that wages were subject to something economists call “market failure.” The idea is that you, as a worker, are at a serious disadvantage compared to your boss when negotiating your wages. So the government has to intervene to correct this failure of the market and create a more level playing field.

The act also made provisions regulating payment for overtime. Employers who violated the law could be sued for back pay and damages. Roosevelt insisted that businesses that violated fair labor standards were toxic to the economy: “Goods produced under conditions that do not meet rudimentary standards of decency should be regarded as contraband and ought not to be allowed to pollute the channels of interstate trade," he said. Roosevelt, we may assume, would frown on shopping at Walmart.

Clearly, the New Deal has somehow transformed into the Raw Deal. Since the rise of Ronald Reagan, the American workplace has been morphing from a relatively level playing field into a theater of exploitation. This process has been aided and abetted by influential economists known as "free-market fundamentalists," who dominate the Ivy League and policy circles. They have convinced policy makers and politicians that a voluntary system magically guided by an “invisible hand” produces outcomes that are good for most people. In their view, the economy is a system of equal exchanges between workers and employers in which everybody who does her part is respected and comes out ahead. Obviously, they don’t focus their research on labor: they may talk about unemployment or wages – keeping the former high and the latter low — but the conditions workers face are completely off the radar of these economists. (If you’d like to see how this kind of thinking plays in the mainstream media, take a gander at a recent post by Slate’s Matt Yglesias: “Different Places Have Different Safety Rules and That's OK.”)

Here’s where we are: the twin evils of high unemployment and economic inequality have joined forces to turn workers into so many expendable units in the great capitalist machine. Union-busting, globalization, outsourcing, downsizing, and recession have turned dignified jobs into opportunities for employer predation. I have called job insecurity the “Disease of the 21st Century” and it has clearly metastasized into a situation in which people are terrified of doing or saying anything to jeopardize employment, no matter how egregious the abuse. As long as there aren’t enough jobs, bosses maintain the upper hand. In the face of public opposition and recent revelations about the flaws in research used to support austerity, deficits are still the focus of economic policy rather than job creation. All of this conspires to protect crooked employers and exploit workers, making wage theft a crime without punishment.

What do we do?

The Department of Labor is supposed to enforce fair labor practices, but budget cutting at the insistence of Big Business has had the desired effect. Currently, there are only 1,000 enforcement officers protecting 135 million workers. That would be enough to cover, say, the city of Chicago. Maybe! You can place a claim through the department, but you may not get results. Workers are often left to fend for themselves. (One thing every worker can do is consult the website CanMyBossDoThat.com to at least get a sense of your rights.)

In Wage Theft in America, Kim Bobo outlines a variety of things that communities and activists are doing to address the crisis, from creating task forces to identifying agencies that help low-wage workers know when they are being cheated. There’s been some good news: campaigns to strengthen wage theft laws in several states, cities and counties are underway. The state of New York has enacted statewide legislation to protect workers from wage theft. In Miami-Dade County, a city-wide ordinance was established in 2010 which focuses on eliminating the underpayment or nonpayment of wages and targeting unscrupulous businesses. Chicago’s newly adopted wage theft ordinance will strip employers of their business license if they are caught cheating workers. But the key word is "if." Methods are sneaky and workers often have no idea that they are being robbed.

Local direct actions have sometimes been effective in highlighting and shaming wage thieves. In Seattle, Eric Galanti of the Admiral Pub tried to withhold the final paycheck of his cook Lucio when he was deported to Mexico. But Lucio’s family, along with advocacy groups like Casa Latina, fought back by plastering the city with posters, placing messages on social media and picketing. Finally, Galanti gave in. Stories like this are encouraging, but it's hard to imagine that sort of thing working in, say, Mississippi.

Immigration reform is a key piece of the puzzle — it will help many low-wage, undocumented workers from being exploited by wage thieves who use deportation as the threat. Modernizing record-keeping, imposing criminal liability on wage thieves, and increasing public awareness of wage fraud would also help to combat the problem. High unemployment remains one of the biggest factors in encouraging wage theft, but we're not making good progress in that area. The sequester is expected to lay off 750,000 Americans this year alone. Instead of helping the problem, our elected officials are worsening it. Until these issues are addressed, workers will remain vulnerable to predatory bosses. And that costs everybody.