Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Foreclosure Reviews
Written Testimony of Alys Cohen
National Consumer Law Center also on behalf of Community Legal Services of Philadelphia, Connecticut Fair Housing Center, Consumer Action, Consumers Union, Empire State Justice Center, Financial Protection Law Center, Housing and Economic Rights Advocates, Legal Aid Center of Southern Nevada, Inc., Michigan Foreclosure Task Force, National Association of Consumer Advocates, National Council of La Raza, National Community Reinvestment Coalition, National Fair Housing Alliance, National People’s Action, Neighborhood Economic Development Advocacy Project, North Carolina Justice Center
Before the United States Senate Subcommittee on Housing, Transportation, and Community Development of the United States Senate Committee on Banking, Housing, & Urban Affairs
State attorneys general are descending on Washington again this week for negotiations with federal regulators and the nation’s largest mortgage servicers over the purpose of a multibillion-dollar fund aimed at helping troubled borrowers.
The idea behind the yet-to-be-created fund, the size of which remains in flux but could eclipse $20 billion, is to punish the servicers for their shoddy foreclosure practices, which came to light in the fall, and to put that money toward keeping struggling homeowners in their homes.
Federal banking regulators have not officially imposed their new rules for the top mortgage servicers, but criticism is already being heard. A wide coalition of consumer and housing groups is denouncing the legal agreements, which are likely to be published within a few days. ?
[…]
The problem, said Alys Cohen of the National Consumer Law Center, is the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”
Regulators including the Office of the Comptroller of the Currency, Federal Reserve and Office of Thrift Supervision could announce the agreements with the banks and thrifts as early as next week, though a date wasn’t final, according to people familiar with the matter.
The regulators are likely to act ahead of state attorneys general, who are also in talks with the banks. Those discussions are moving at a slower pace amid disputes among several state officials.
Seriously, why aren’t they all working together? Lefty doesn’t know what the right is doing.
Here’s the banks’ counterproposal for a servicing fraud settlement. I can sum it up in two words: drop dead. Or two letters: F.U. This proposals is so pathetically thin that it’s not a good faith counterproposal. This document only deals with servicing standards–nothing in it whatsoever about penalties, modification quotas, etc. But even on servicing standards it is a bunch of empty promises to have internal controls and try harder.
The first point about this counterproposal is simply to note what’s absent from it:
(1) nothing about principal reductions
(2) nothing about second liens and conflicts of interest
(3) nothing about MERS (reserved for later)
(4) nothing about in-sourced vendor fees or force-placed insurance to affiliates. This makes the fees and force-place insurance sections pretty meaningless.
Read the excerpts below carefully… You’ll be screwed if you plan to wait on any reasonable settlement, just like “HAMP” left you waiting for your mod. Don’t expect miracles!
“We have a long way to go,” Iowa Attorney General Tom Miller, who is leading the effort from the states’ side, said after the afternoon session broke up.
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Lengthy negotiations work to the banks’ advantage, critics say.
“The banks’ strategy is to run the clock,” a Georgetown University law professor, Adam Levitin, said. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”
“I am incensed that the FBI has not filed one criminal case,” Rep. Marcy Kaptur (D-Ohio) said, referring to the lack of prosecutions against major banking executives. “And I’m very worried that the game that’s being played here is to run out the statute of limitations.”
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Oh and AG’s make sure the banks get barred from Deficiency Judgments in your settlement!
The document, reviewed by The Wall Street Journal, is a response to a 27-page term sheet banks received earlier this month from state attorneys general that would require the servicers to consider reducing principal for troubled borrowers. The 15-page bank proposal, dubbed the Draft Alternative Uniform Servicing Standards, includes time lines for processing modifications, a third-party review of foreclosures and a single point of contact for financially troubled borrowers. It also outlines a so-called “borrower portal” that would allow customers to check the status of their loan modifications online.
But the document doesn’t include any discussion of principal reductions. Nor does it include a potential amount banks could pay for borrower relief or penalties. Government officials have discussed a settlement sum of more than $20 billion.
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