clear42: bank foreclosure

Sheila Bair wrote an op-ed article in 2007 that made people in Treasury think, "Sheila Bair is difficult."

She was surprised to learn that mortgage servicers had pushed 99% of those surprise-reset mortgages (whose en masse defaults sparked the crisis) into foreclosure rather than modifying them. So she voiced her frustrations in an article.

According to the NYTimes:

[In an op-ed in the New York Times, she] called on mortgage servicers to reset adjustable-rate mortgages en masse. “These borrowers would still be required to make their monthly payments... Avoiding foreclosure would protect neighboring properties and hasten the recovery.”

Although she made no mention of the Treasury Department, everyone in the bureaucracy knew that it was her real target. It was now official: Sheila Bair was difficult.

That's one of two interesting things about the foreclosure process that we learned reading an interview with Bair in the NYTimes. Basically, that mortgage servicers "promised" (whatever that means, we don't find out. Obviously, it wasn't in writing.) to modify mortgages, but instead, they foreclosed on most properties and modified just 1%.

The second is that when explaining the rush-to-foreclosure process she says, “I think some of it was that they didn’t think borrowers were worth helping. There was some disdain for borrowers.”

Honest! And totally unproven because she doesn't go into detail. But it reminds us of the opposite of when Jamie Dimon said, "Giving debt relief to people who really need it. That's what foreclosure is."

It's a homeowner's worst nightmare: That banks rush to foreclose 99% of the time because (Bair suspects) bankers have a disdain for borrowers.

The entire "exit interview," which Bair gave to the NYTimes as she's leaving the FDIC for Pew Trusts, is a good read >

Two other interesting points:

1. She echoes the voice of the public when it comes to capital requirements (they should be higher to discourage risk-taking behavior) and the foreclosure process (banks should instead help homeowners modify the loans). She similarly seems to forget that politicians encouraged banks to loan to riskier candidates by throwing lawsuits at them if they disqualified borrowers with low income, and instead blames mostly the securitization process and banks' eagerness to make risky bets.

2. She also thinks that Bear Stearns should have failed, not given to Jamie Dimon as a Christmas present, like the book, Too Big To Fail put it.

Bair told Joe Nocera:

“Let’s face it.. Bear Stearns was a second-tier investment bank, with — what? — around $400 billion in assets? I’m a traditionalist. Banks and bank-holding companies are in the safety net. That’s why they have deposit insurance. Investment banks take higher risks, and they are supposed to be outside the safety net. If they make enough mistakes, they are supposed to fail. So, yes, I was amazed when they saved it. I couldn’t believe it. When they told me about it, I said: ‘Guess what: Investment banks fail.’ ”

Regulators guide banks in deciding how much money to put aside to guard against losses -- cash that otherwise could be used to pad their profits -- and approve requests to pay dividends to shareholders or buy back shares to drive up the company's stock price. Concerns over lawsuits -- and the merit of plaintiffs' claims -- could derail banks' financial plans.

Bank of America shares are down 22 percent over the last three months in New York Stock Exchange composite trading. JPMorgan has slid 15 percent, while Wells Fargo has declined 13 percent. Citigroup has dropped 8 percent.

"Servicing problems continue to present significant operational and litigation risk to servicers and originating banks," Pearce plans to say, according to a copy of his prepared remarks.

For the larger economy, the lawsuits represent potential pitfalls that could delay a broader recovery.

"The housing market cannot heal and recover until mortgage servicing and foreclosure problems are resolved and systems are adequate to the task at hand going forward," according to Pearce's prepared remarks. "A comprehensive resolution for past servicing errors is essential to the recovery of the housing market and greater economy."

The five largest servicers, which collect payments for three out of every five home loans, are engaged in discussions with state and federal authorities to settle accusations of defective and sometimes-illegal foreclosure practices.

"Poor mortgage servicing practices have both contributed to the creation of the housing crisis and acted as an impediment to its resolution," Pearce plans to say, according to his prepared remarks.

A recent Treasury Department audit of the 10 largest servicers in the HAMP program found that four of them needed "substantial improvement." The remainder were found to need "moderate improvement." None passed with flying colors.

Pearce says in his prepared remarks that about 90,000 homeowners are contesting their foreclosures in court, an indication of poor mortgage and foreclosure practices. As a result, the average foreclosure took nearly nine months to process as of December, according to Pearce's remarks. It took just four months as of 2007.

* * * * *

READ THE STATEMENT:

Mark Pearce 7-7-11 testimony

* * * * *

Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an email; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news. He can be reached at 1+917-267-2335.

Monday, August 1, 2011

bank foreclosure

Obama, Boehner Announce Agreement to Raise Debt Ceiling, Avoid <b>...</b>

Morning <b>News</b> | Slog

More bad poll <b>news</b> for Obama as debt deal brings smiles to Capitol <b>...</b>

No comments:

Post a Comment

clear42

Followers

Blog Archive

About Me