State Officials, Federal Regulators Could Issue Separate Orders For Foreclosure Reform

The rift continues to widen between state and federal officials over foreclosure reform.

Since the 50 state attorneys general first issued their proposal to aggressively overhaul the foreclosure process and penalize servicers, the two sides have clashed over the specifics, with states reportedly advocating for stricter measures than federal regulators.

Disagreements have now become pronounced enough to leave open the prospect that the states could eventually issue their own orders for reform, independent of the Comptroller of the Currency and Federal Reserve -- two government agencies charged with reforming the foreclosure process, according to the Wall Street Journal.

In a letter sent on Monday to the Federal Reserve, the WSJ reports, 22 current and former board members of the Fed's Consumer Advisory Council said federal regulators' potential proposal appears to be "profoundly disappointing," leaving "too much discretion" to mortgage companies without imposing strict enough penalties for foreclosure abuses.

America's five largest mortgage firms have saved over $20 billion since the start of the housing crisis by shortcutting the home loan process of struggling borrowers, HuffPost's Shahien Nasiripour reported earlier this month.

In a report last month that drew the ire of housing and consumer advocates, the Fed found no evidence of wrongful foreclosures.

Still, other regulators have advocated hitting the 14 largest mortgage firms with upwards of $30 billion in penalties for past abusive practices.

Amid the debate, a new paper entitled "The Economics of the Proposed Mortgage Servicer Settlement," funded in part by the financial services industry, disputes the notion that the state attorneys generals' proposal will protect homeowners, arguing that it would instead "generate significant unintended negative consequences" by raising "the number of defaults and servicing costs."

Reuters blogger Felix Salmon doesn't agree, calling the paper "ridiculous" and emphasizing the conflict of interest. "Even bankers," Salmon notes, "aren’t making these arguments with a straight face any more."

The federal debate over the foreclosure process has heated up in recent weeks, with the Obama administration backtracking on an earlier, more dramatic proposition more in line with that of the states attorneys general. The president's earlier proposal would have required mortgage lenders to reduce monthly payments for millions of U.S. homeowners.

Comments

[momwith4girlz]

12:50 AM on 04/14/2011

Banks are so crooked...I'm keeping my money in my mattress from now on!

[Greyfox01]

07:31 PM on 04/13/2011

Greed is like alcoholism, enough is never enough, even if it means cutting the heart and soul out of a nation and it's people to feed itself.

Again fuel & heating oil prices appear to be a result of "The New World Odor". "The Hole in the Wall Street Gang" can make billions while ten's of thousands of children will go to bed hungry tonight in America, and the CFTC is letting they get away with it. The price of crude is up 68% from January of 2009, and once again it's on pure speculation, and Americans suffers. If you look back over 2008 and the rise of fuel prices you can follow the tracks to the point when crude and fuel prices trggered the "coup de grâce" to housing market in Noverber of 2008. That's when consumers had to choose between, gas, putting food on the table, or paying the mortgage. It started with a dozen forclorures, then a hundred, then a thousand, then ten thousand, and then the economy began unraveling at super sonic speeds. But the greedy seem to have forgotten all of that, and have returned to their blood sucking habits.

I know of a preson who on his front door has a sign saying "We're so hungry we could eat a crude oil speculator".

Have any of you heard of Michael Greenberger?
http://www.michaelgreenberger.com/testimony.html
Scroll down to June 23, 2008

[shadow013]

08:18 AM on 04/14/2011

Approve of the alcoholism analogy! Ever noticed how egocentric alcoholics become while damaging the people around them? Soros-funded Media Matters says official inflation rate is so small, of no consequence. Housing prices going down are figured into the rate, but food and fuel are not. So just eat your house, I guess, if you still have one, and don't worry about the Federal Reserve. (See recent story by Matt Taibbi in Rolling Stone.)

[concerned21 2]

12:09 PM on 04/13/2011

more needs to be reported on Deutsche bank and its roll in these foreclosures.

[momwith4girlz]

12:30 AM on 04/14/2011

Deutsche is like a slippery eel. They claim to only be the "Gate Keepers" and have NOTHING to do with the foreclosures.

[outofstepper]

01:06 AM on 04/13/2011

The federal government regulating corporations has become a conflict of interest.

[outofstepper]

01:00 AM on 04/13/2011

"...disputes the notion that the state attorneys generals' proposal will protect homeowners, arguing that it would instead "generate significant unintended negative consequences"

Do these people really think we believe anything that comes out of their mouths? If a banker told me the sky was blue I would check for myself.

[calypsolouie]

12:00 AM on 04/13/2011

What happpened to the commerce clause that the libs are using to justify obamacare

[outofstepper]

01:01 AM on 04/13/2011

Go read up on it. Then read up on the state statutes that have to do with banking in their different states.

[Jonathan Carr]

11:06 PM on 04/12/2011

Clearly, the states' attorney generals have to act in concert to put the banks feet to the fire. The banks and servicers will get away with whatever is legally possible and would rather pay lawyers than modify loans (simple cost benefit analysis). That is why the states need to act since apparently Goldmen Sachs alum in the Obama administration are blocking any substantive reform / action. The foreclosure crisis is a serious drag on the economy and if Obama would spend two minutes on this he would realize that without solving this problem, the economy will not rebound in the way he thinks it should.

[momwith4girlz]

12:33 AM on 04/14/2011

I agree!

[Old Claudius]

10:17 PM on 04/12/2011

Mortgage management reform appears to be one of those areas where the example of the well-behaved mule, who only had to be whacked hard on the head with a very large club, to get his attention, applies.

In the case of mortgage management the large club will have to be thousands of mortgage-holders, foreclosed and not foreclosed, filing individual and class actions to collect compensations for damages, including results of fear and insecurity, emotional distress, psychological upset and all the rest, all given credence by courts and juries in their considerations of crime, negligence and industrial and professional malpractices victims, in cases those have carried to court forums.

Here they will be the injuries suffered in direct and proximate result of mortgage servicers' careless, illegal and unethical activities, willful and deliberate disregards for customary proprieties and practices and disregards for common and reasonable record-keeping to safeguard their customers.

It should take personal injury law firms no time to adjust their customary complaint forms to fit to mortgage-injury cases, and then to pursue those with the same efficiency and good results they are used to, on the same contingency schedules.

As I read liability law and market economics a tsunami of contingency-case consumer claims is the appropriate free-market corrective in cases where an industry sector has grown slothful, arrogant and careless.

It is how the market-place reminds those who were, and those who weren't, that "Careless practice is not a good idea."

[Klarsonent]

11:47 PM on 04/12/2011

I agree with you. However, how many Attorney's are taking these cases on a contingency basis?

[ACMSinc]

09:51 PM on 04/12/2011

And the FRAUD continues.....

[USNDC]

09:15 PM on 04/12/2011

Where is President Obama's leadership on this monumental national issue ?

Oh, that's right ... he doesn't lead on any issues.

[shadow013]

08:21 AM on 04/14/2011

Does it look like he is following someone else's orders?

[GetRealSoon]

09:12 PM on 04/12/2011

I got to be just about the only one left stupid enough believing justice, due process, and government was actually going to work this time.

[concerned21 2]

10:40 PM on 04/12/2011

no- some days i actually think that too .but...................

[outofstepper]

01:02 AM on 04/13/2011

I haven't thought that about corporations or the rich for probably twenty years now.

[Linda Rider]

08:19 PM on 04/12/2011

Nothing substantial or commensurate is being proposed or levied against the banksters. $30B is nothing-that would not even cover one state for remedies to "fraudclosure." The local judiciaries have not followed the letter of the law-only now are NY, FLA, MASS and now some in OH judiciaries smacking down the legal fraud mills for their part and are holding them accountable. The Feds are the problem, why would anyone expect them to be capable of policing anyone. Homeowners in foreclosure are in dire need of legal counsel free of charge provided by the Fed Govt, especially when as much as 70% of ALL mortgage paper may be bad. This IS an issue that should concern everyone, this bad paper effects ALL mortgages, and clean chain of title, not just foreclosures.

[Klarsonent]

11:49 PM on 04/12/2011

You are absolutely right. I've been posting the importance of a clean chain of title whenever I can, but I'm wondering how many are listening?

[concerned21 2]

12:12 PM on 04/13/2011

some reports say most banks could never produce a clear title is asked and that is why they are trying to change laws to forclose without it. esp dangerous in non-judicaial foreclsure states

[momwith4girlz]

12:46 AM on 04/14/2011

I'm listening! But are they? I requested a certified copy of all my docs ( loan, assignments etc), my loan servicer, instead sent me 2 cd disc whose docs included an un-recorded assignment dated 1 year after they defaulted. How can they default before the loan was assigned to them?Cart before the horse..eh? Greedy? Fraud?

[lily]

08:18 PM on 04/12/2011

Just more proof that Obama only cares about the rich.

[concerned21 2]

07:57 PM on 04/12/2011

the OCC has done nothing but protect the banks from all the state laws they are violating. the banks are waiting for the OCC to create a slap on the hand contract and then hide under it saying they are complying with federal guidlines. bonniedoon you are right more people should be paying attention to this!

[ACMSinc]

09:51 PM on 04/12/2011

The OCC is the Banks!

[concerned21 2]

10:41 PM on 04/12/2011

good point! i read the OCC is actually finance by the banks? is that true? how can they then regulate the banks? well guess thats a silly question.....

[BonnieDoon]

05:23 PM on 04/12/2011

How sad. Only 17 comments to this article in the 4 1/2 hours since it was posted.

This subject affects every single American. There are so many issues - the underwater mortgages that hurt the economic recovery, the clouded chain of title on property ownership, the displaced families that lost jobs and then homes, the nearly stagnant creation of jobs tied to new construction, the pension funds and 401Ks that lost money invested in mortgage-backed securities, the fees and taxes lost to municipalites that had to cut services and personnel - that impact the future of our children.

Nothing is being done to fix the problem. Nothing is being done for Americans on Main Street. Nothing is being done to stop the illegal actions of the banksters and the Mortgage Industry.

Nothing is being done and not enough Americans recognize it or care.

[SorenK]

06:07 PM on 04/12/2011

Sad truth is that the really nasty stuff that put folks in houses they could never afford has been washed those folks out. Now the folks losing there homes are either borrowed too much on homes they could originally afford and people who are suffering because of lower wages or job lose.

It is political suicide to push for principal write downs. We would all ask for them. Why should I get one and you not? When do you say bad loans were made? What is buying lied on loan application, which most of them did on no doc or unverified doc loans.

[Klarsonent]

11:52 PM on 04/12/2011

I agree with you completely. I keep posting concerning the clean chain of title, but I have doubts that anyone is listening to me.