Investigations Into Foreclosure Lapses Culminating In Settlement

Although the investigations into the foreclosure operation lapses seems to be heading

for a settlement those who had hoped for justice would be disappointed as the amount of fine and other restrictions is hardly in proportion to the wrong that has been done.

Secondly a proper assessment of the legal irregularities and damage done is impossible because of the state and federal teams working jointly in the probe. The issues before both were different the federal government concerned with regulatory lapses and the state about the violating of state laws.

The banks received on 3rd March a proposal running into 27 pages that asked them to bring down loan balances no penalties were specified. Instead a code of behaviour was detailed regarding how these banks should treat those seeking loan modifications.

It was correctly pointed out that banks could not resort to foreclosure while talks proceeded regarding loan modification. But the issue side tracked to a code of conduct and as such it is not different from what has been laid down in HAMP. The problem was not about the guidelines but its enforcement. The Treasury had not sanctioned even a single servicer for breaking the code of conduct while participating in the programme. Thus this entire exercise seems to be a substitute for HAMP.

The House Financial Services Committee very recently passed a bill on 3rd March to bring an end to HAMP and other related foreclosure relief plans. The House will in all probability follow it up next week. The Senate may not toe the line as they know HAMP to be indefensible. Thus this settlement moves into the crack caused by a programme that is crippled without Congress support or that of the general public. The latter has expressed their opinion about their disgust with the crawling pace of loan modification.

The point to note is that the code of conduct suggested is separated from the monetary penalty something not usual. The only cause for this separation is to assist the banks in minimizing their exposure as far as possible.

Politico Morning Money discussed the matter with some executives of the banking world about the global settlement amounting to $20 billion. The executives opine that this is a naked backtracking by the regulators in particular the CFPB. The banks have little interest in signing as the settlement is hardly business friendly.

The clowns that collapsed world economy think that even the least accountability translates to being anti-business. But the courts not accepting nonsense anymore without proof of legal standing; investors have started to shy off. Perhaps this is the lesson they will understand.

by: Julie Thompson

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