Monday, March 14, 2011
Dueling Foreclosure Settlements
As a proposed settlement with major U.S banks accused of mishandling home foreclosures takes shape, the Office of the Comptroller of the Currency, which regulates these financial institutions, isn't lending its support, the Washington Post reported recently. The agency believes the proposed $20 billion-plus fine and mortgage procedures being sought by President Barack Obama's administration and state attorneys general simply doesn't work.
Instead, the OCC, which operates independent of the administration, is working on its own settlement package against banks accused of flawed and fraudulent dealings within foreclosures. The agency has sent its own proposed changes, which focus on modifying mortgages in default, to the banks it oversees.
Among other issues, the OCC's so-called draft orders also try to lower the banks' financial risks that may results from mortgage modification and foreclosure process. The agency is also weighing financial penalties and the severity of punishment for banks that have committed foreclosure infractions.
With the Obama administration pushing for a solution to help struggling homeowners as waves of foreclosures impede economic recovery across the United States, especially in Florida, the lack of consensus represents a continuing division over the best way to right a weak economy.
The OCC and other bank regulators are accused inside Washington of being too soft on banks, placing more emphasis on the industry's concerns than homeowners struggling to meet monthly obligations. Conversely, agencies seeking a solution face criticism that their efforts, designed to ease this burden, will only exacerbate recovery efforts.
As these competing proposals for change take shape, any decision about the depths of penalties the banks may face, including whether the proposed $20 billion-plus fine would be used to help distressed borrowers, must satisfy the Obama administration's goals of staving off an expected 1.5 million foreclosures, the Post reported.
The settlements, once reached, look to resolve allegations, which surfaced last fall, that banks practiced flawed and fraudulent foreclosure practices: that banks didn't follow federal rules requiring mortgage modifications, ignored state laws when foreclosing and not being truthful to federal housing programs.
In a related development, the Washington Post also reported federal officials are talking with banks about a settlement that addresses the significant documentation problems that forced major U.S. lenders, including banks, to freeze thousands of foreclosures last fall. Improvement of staffing levels and designating key officers to ensure proper oversight of mortgage modifications and foreclosures are among the proposals. Another idea would keep banks from starting a foreclosure proceeding while modifying a mortgage.