A top housing official on Wednesday said the current system for processing foreclosures is not equipped to deal with the nation's backlog of troubled mortgages and admitted national mortgage servicers cut corners to comply with state and local property laws.
While mortgage servicer deficiencies “undoubtedly reflect strains on a system that is operating beyond capacity and was never designed to handle the volume of nonperforming loans that we are seeing today, they also represent a breakdown in corporate internal controls and the integrity of mortgage servicing and foreclosure processing,” said Edward DeMarco, the acting director of the Federal Housing Finance Agency.
Daniel K. Tarullo, a member of the Board of Governors of the Federal Reserve System, suggested broad national mortgage servicer standards need to be put in place.
“The system as it is now simply was not developed with a large amount of troubled mortgages in mind,” he said. “We do need more of a national effort to impose standards on everybody.”
Concern over mortgage documentation has grown in recent weeks after revelations that “robo-signers” were employed to quickly sign thousands of foreclosure documents without proper legal oversight.
“Many of the servicers have not been doing their jobs,” said Senate Banking Committee Chairman Sen. Chris Dodd (D-Conn.). “The problem may actually be a lot larger than we previously thought.”
Dodd pressed the witnesses at a hearing of the Senate Banking Committee, all of which were members of the Financial Stability Oversight Council created by the Dodd-Frank financial law, on why potential solutions to the problem had not been discussed at that level. The FSOC is an interagency group charged with identifying and monitoring systemic risks to the economy.
“What is the FSOC doing? It’s the law of the land now. Are you people meeting?” he asked.
John Walsh, Acting Comptroller of the Currency and FSOC member, said discussions on the foreclosure problem at previous meetings were general, and did not delve into specific solutions.
“I cannot believe that with all the brains that are sitting at the [witness] table, there’s not one of you who can come up with the answer to solve this crisis, which is about to go the wrong way again,” said Sen. Jim Bunning (R-Ky.).
Sheila Bair, chairman of the Federal Deposit Insurance Corporation (FDIC), said the foreclosure problems do not immediately threaten the nation’s economy, but “their implications are potentially serious and dangerous to the nation’s health and recovery.”
Sen. Jeff Merkley (D-Ore.) suggested that mortgage servicers be prevented from advancing foreclosure proceedings while loan modification proceedings are also underway, but DeMarco contended that Fannie Mae and Freddie Mac have an obligation to taxpayers to advance the foreclosure process if a prompt modification timeline is not being kept by the homeowner.
“I fully understand the concern about confusion for the borrowers,” he said. “We absolutely want the servicers of Fannie Mae and Freddie Mac loans to do everything possible to come up with an alternative to foreclosure…[but] at some point, once the foreclosure process starts, I’m looking at conserving these assets on the behalf of the taxpayer.”
Sen. Robert Menendez (D-N.J.) set his sights on the Treasury Department’s Home Affordable Modification Program, which was created to help distressed homeowners modify their mortgages to avoid foreclosure. Although the program was given resources to process 7 to 9 million mortgages, Menendez said just 490,000 permanent modifications have been made.
“Less than 2 percent of the funds for HAMP have been expended — there’s something wrong with that,” he said.
Phyllis Caldwell, chief of the Treasury’s homeownership preservation office, defended the program, saying that the homeowners it has been able to help have fared well after going through the program.
“While we certainly haven’t hit the numbers we want…what we do know is that those homeowners that are in HAMP have affordable and sustainable modifications that have used taxpayer resources wisely,” she said.
“I don’t quite see it the way you see it, I don’t think many members see it the way you see it,” Mendendez responded.
This article can be found at: http://thehill.com/blogs/on-the-money/banking-financial-institutions/131...
A top housing official on Wednesday said the current system for processing foreclosures is not equipped to deal with the nation's backlog of troubled mortgages and admitted national mortgage servicers cut corners to comply with state and local property laws.
While mortgage servicer deficiencies “undoubtedly reflect strains on a system that is operating beyond capacity and was never designed to handle the volume of nonperforming loans that we are seeing today, they also represent a breakdown in corporate internal controls and the integrity of mortgage servicing and foreclosure processing,” said Edward DeMarco, the acting director of the Federal Housing Finance Agency.
Daniel K. Tarullo, a member of the Board of Governors of the Federal Reserve System, suggested broad national mortgage servicer standards need to be put in place.
“The system as it is now simply was not developed with a large amount of troubled mortgages in mind,” he said. “We do need more of a national effort to impose standards on everybody.”
Concern over mortgage documentation has grown in recent weeks after revelations that “robo-signers” were employed to quickly sign thousands of foreclosure documents without proper legal oversight.
“Many of the servicers have not been doing their jobs,” said Senate Banking Committee Chairman Sen. Chris Dodd (D-Conn.). “The problem may actually be a lot larger than we previously thought.”
Dodd pressed the witnesses at a hearing of the Senate Banking Committee, all of which were members of the Financial Stability Oversight Council created by the Dodd-Frank financial law, on why potential solutions to the problem had not been discussed at that level. The FSOC is an interagency group charged with identifying and monitoring systemic risks to the economy.
“What is the FSOC doing? It’s the law of the land now. Are you people meeting?” he asked.
John Walsh, Acting Comptroller of the Currency and FSOC member, said discussions on the foreclosure problem at previous meetings were general, and did not delve into specific solutions.
“I cannot believe that with all the brains that are sitting at the [witness] table, there’s not one of you who can come up with the answer to solve this crisis, which is about to go the wrong way again,” said Sen. Jim Bunning (R-Ky.).
Sheila Bair, chairman of the Federal Deposit Insurance Corporation (FDIC), said the foreclosure problems do not immediately threaten the nation’s economy, but “their implications are potentially serious and dangerous to the nation’s health and recovery.”
Sen. Jeff Merkley (D-Ore.) suggested that mortgage servicers be prevented from advancing foreclosure proceedings while loan modification proceedings are also underway, but DeMarco contended that Fannie Mae and Freddie Mac have an obligation to taxpayers to advance the foreclosure process if a prompt modification timeline is not being kept by the homeowner.
“I fully understand the concern about confusion for the borrowers,” he said. “We absolutely want the servicers of Fannie Mae and Freddie Mac loans to do everything possible to come up with an alternative to foreclosure…[but] at some point, once the foreclosure process starts, I’m looking at conserving these assets on the behalf of the taxpayer.”
Sen. Robert Menendez (D-N.J.) set his sights on the Treasury Department’s Home Affordable Modification Program, which was created to help distressed homeowners modify their mortgages to avoid foreclosure. Although the program was given resources to process 7 to 9 million mortgages, Menendez said just 490,000 permanent modifications have been made.
“Less than 2 percent of the funds for HAMP have been expended — there’s something wrong with that,” he said.
Phyllis Caldwell, chief of the Treasury’s homeownership preservation office, defended the program, saying that the homeowners it has been able to help have fared well after going through the program.
“While we certainly haven’t hit the numbers we want…what we do know is that those homeowners that are in HAMP have affordable and sustainable modifications that have used taxpayer resources wisely,” she said.
“I don’t quite see it the way you see it, I don’t think many members see it the way you see it,” Mendendez responded.