House Financial Services Committee Chairman Barney Frank
(D-MA) presided over a hearing held last Friday that examined the role of mortgage servicing in the foreclosure crisis, focusing specifically on ongoing problems with loan modifications and the need for improvements in servicing practices and responsiveness to consumers. Chairman Frank urges the mortgage servicing industry to begin cooperation immediately even though the new law doesn't become effective until October 1:
- Chairman Frank [...] called for restructuring the mortgage servicing industry if servicers fail to cooperate in aggressively forbearing and preventing foreclosures, or if there are institutional roadblocks that prevent mortgage workouts or other restructuring that is needed in order to help borrowers, and thereby help the housing market and the economy overall.(1)
For more, see Frank, Waters Urge Mortgage Industry to Forbear Foreclosures Until New Law Takes Effect
Check the Review of Mortgage Servicing Practices and Foreclosure Mitigation webpage
for the list of the witnesses who testified, links to their prepared statements, links to available committee member statements, and a printed version of the hearings.
Go here to view the video of the hearings
Some of the hearing testimony from a mortgage industry witness suggested that it is unprofitable for loan servicers when a homeowner goes into default. A contrary view is held by Alfred A. DelliBovi, chief executive of the Federal Home Loan Bank of New York(2)
(and mentioned by name by Congresswoman Waters in her opening remarks), as expressed in the following excerpt from a July 20, 2008 article
in The New York Times
- Meanwhile, servicers, whom investors pay to collect mortgage payments from borrowers, often have no incentive to help borrowers find the ultimate holder of a loan, Mr. DelliBovi said. “Servicers make more money on a foreclosure than when the loan is worked out,” he said. (emphasis added)
Thanks to Mike Dillon at GetDShirtz.com for the heads-up on this postscript.
(1) In actuality, Chairman Frank promised the mortgage servicing industry, in no uncertain terms, that in the next Congress, he will work with the committee members to do everything possible to abolish their industry as it currently exists, if the institutional roadblocks that prevent loan workout cannot be overcome for those currently facing foreclosure and who may lose their homes before the October 1, 2008 effective date of the new law.
(2) The Federal Home Loan Bank of New York, which lends money to roughly 300 local banks in New York, New Jersey, Puerto Rico and the United States Virgin Islands to finance mortgages, is currently spearheading a loan workout initiative in New Jersey. Under this initiative, called the Housing Assistance and Recovery Program, or HARP, the Home Loan Bank lent $6 million to Magyar Bank, based in New Brunswick, N.J. The First Baptist Church of Lincoln Gardens, in Somerset, N.J., which provides counseling services through its First Baptist Community Development Corporation, identifies homeowners who are in danger of foreclosure, then negotiates with the lender to buy out the loan. For more, see The New York Times: Struggling, but Staying in a Home. questionable mortgage servicing practices tactics xero MortgageServicingIssuesAlpha