Tuesday, October 23, 2012

Nice in theory

"The creation of the Consumer Financial Protection Bureau is arguably the best reform to emerge from the Dodd-Frank law. An effective bureau will rectify and prevent lending abuses and ensure that consumer protection is a central priority in a sound banking system.

Yet, for all that promise, the bureau’s recent proposal to regulate the foreclosure process is a disappointment. At issue is mortgage servicing, an industry that is dominated by big banks and involves processing mortgage payments for investors who actually own the loans. When homeowners do not pay on time, it is up to servicers to manage defaults, loan modifications and foreclosures. 

The problem is that as delinquencies surged in the housing bust, mortgage servicers proved themselves incompetent — or worse, deceptive and abusive — in doing the job. The result has been potentially millions of wrongful foreclosures, in which troubled borrowers have not been given a fair shot at modifying their loans and keeping their homes. 

There have been good attempts by federal regulators and Obama administration officials to address the worst practices. For instance, a legal settlement over foreclosure abuses, reached earlier this year between five banks and state and federal officials, included curbs on conflicts of interest that led banks to favor foreclosures over modifications. The settlement also included safeguards against violations of borrowers’ legal rights in a foreclosure, and a crucial ban on dual tracking, the confusing practice in which servicers evaluate borrowers for loan modifications while simultaneously initiating foreclosure. 

In addition, the administration’s antiforeclosure programs established specific tests for participating banks to use in evaluating borrowers for loan modifications, and then required banks to offer new loan terms to all eligible borrowers. It is up to the consumer bureau, however, to write permanent new rules for the entire industry. Consumer advocates widely expected the bureau to incorporate and expand the reforms in the foreclosure settlement and other antiforeclosure protocols. 

Instead, the proposal retreats from many existing requirements. It does not impose any meaningful standards for loan modifications beyond those already required by various federal programs and agreements, many of which will expire in the future and none of which apply to the entire industry. In a stunning reversal, the proposal actually permits dual tracking."

I do not believe anything that has been created has helped the average American, like our current politics, it is all good speak, no action, no chance of enforcement.

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