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Banks Offer Servicing Standard Concessions
Negotiations between the nation’s biggest banks and state attorneys general over mortgage servicing reforms continued this week, with the five largest banks reportedly offering a rebuttal to the 27-page proposal unveiled by a group of state officials and federal agencies early this month.
The banks’ counteroffer, a 15-page proposal, included some fluffy language, The Wall Street Journal’s Dan Fitzpatrick and Ruth Simon wrote Tuesday. In no fewer than 15 instances, the banks use the phrase “reasonably designed,” Fitzpatick and Simon report. The phrase was included, for example, in sections discussing timelines for loan modification decisioning and requirements for affidavits and other sworn statements to be accurate.
Compared to the AGs’ initial salvo, the banks suggested less specific terms around steps to be taken to ensure compliance with the federal Servicemembers Civil Relief Act. Principal reductions, as expected, are nowhere to be found in the banks’ draft.
More preferable to the banks, according to the WSJ, are certain servicing reforms such as single point-of-contact requirements for default management and better standards for overseeing third-party law firms.
The proposal put forth by Iowa Attorney General Tom Miller and other AGs, and supported by the U.S. Treasury Department, the Federal Trade Commission and the U.S. Department of Housing and Urban Development, among other agencies, was sharply criticized by Republican lawmakers and banks alike. At least five Republican state AGs have also objected to terms included in the proposed settlement.
According to a report in the Huffington Post Monday, Elizabeth Warren, the Obama administration’s special adviser on the Consumer Financial Protection Bureau, outlined to AGs ways in which big banks have under-invested in their servicing operations. The alleged shortcuts have saved the banks billions of dollars, to the detriment of borrowers, according to the presentation, which is dated Feb. 14.
“The presentation also details how much certain firms likely saved in lieu of making the necessary loan-processing adjustments as delinquencies and foreclosures rose,” HuffPost reporter Shahien Nasiripour wrote. “Bank of America, for example, has saved more than $6 billion since 2007 by not upgrading its procedures or hiring more workers, according to the report. Wells Fargo saved about as much, with JPMorgan close behind. Citigroup and Ally bring the total saved to nearly $25 billion.”
SOURCES: WSJ, HuffPost
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