We’ve written at length about servicer abuse at this blog. Nakedcapitalism and many others have launched a petition, Stop Servicer Scams, that you can sign. It’s a simple message:
To Secretary Geithner, Chairman Bernanke, Chairman Bair, and Comptroller Walsh:
Foreclosure fraud, illegal fees, and just plain incompetence have gone on long enough. We believe that it is time that regulators put some rules on big banks and mortgages. As part of the new Wall Street reform bill, you have the authority to impose rules on new mortgages going forward.
Please stop these big banks from cheating their customers.
This is a no-brainer. All the issues lead back to the same thing. We’ve created a brand new system of managing mortgages during the past 30 years that has never been stressed or tested, and now that it has it is failing apart into a corrupted mess. During the bubble the largest banks put together a system of managing the housing market payments system that was never meant to handle a housing market that hit trouble and as such is too thin to work, and subject to serious conflicts of interests and corruption. It’s been four years and it is finally time for a serious government response; it is impossible to imagine the macroeconomy recovering without one.
And it sadly appears to be a fight. Zach Carter, now at Huffington Post, writes Federal Reserve Blocks New Foreclosure Regulations:
Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.
The new regulations would rein in debt collection, loan modification and foreclosure proceedings at bank divisions called “mortgage servicers.” Servicers have committed widespread fraud in the foreclosure process. While the recent robo-signing of fraudulent documents has received the most attention, consumer advocates have complained about improper fees and servicer mistakes that lead to foreclosure for years.
“Given that we’ve seen a massive failure in servicing practices and a massive failure to address servicing in an honest way, I think this is important,” says Joshua Rosner, a managing director at Graham Fisher & Co., and longtime critic of the U.S. mortgage system.
Meanwhile, more than 50 economists and banking experts have written a letter, Open Letter to U.S. Regulators Regarding National Loan Servicing Standards, that directly addresses this topic. I’d recommend reading the whole letter. It starts by noting how badly broken our mortgage servicing system is and then proposing solutions and simple rules to get us to a system that works better. Many of the suggestions are of the “follow the rules and laws already in place, but actually enforce them” variety, which shows how unregulated and broken this crucial part of our fragile financial system is.
Please check out the petition at Stop Servicer Scams.