U.S. mortgage servicers should fund a foreclosure commission that would compensate borrowers to resolve complaints over home seizures, Federal Deposit Insurance Corp. Chairman Sheila Bair said today in a Washington speech.
Bair, who has pushed lenders and loan servicers to extend help to homeowners who have fallen behind on their mortgages, urged creation of a panel modeled on those formed to distribute money to victims of BP Plc’s oil spill in the Gulf of Mexico last year and the Sept. 11 terrorist attacks of 2001.
“Every time servicers have delayed needed changes to minimize their short-term costs, they have seen a deepening of the crisis that has cost them -- and the rest of us -- even more,” Bair told the Mortgage Bankers Association in Washington. “It is time for government and industry to reach an agreement that will finally bring closure to the crisis.”
Lawmakers including U.S. Representative Maxine Waters, a California Democrat, and Ted Kaufman, the former senator who leads the congressional panel overseeing the Troubled Asset Relief Program, say mortgage servicers haven’t done enough to stem the tide of foreclosures flowing from the collapse of the U.S. housing market. Bair has said the industry’s failure to act has slowed the economic recovery by stunting the market’s ability to work through foreclosures.
The $20 billion Gulf Coast Claims Facility was funded by BP at the urging of President Barack Obama. It is administered by Kenneth Feinberg, a Washington lawyer who also managed government funds for victims of the attacks on the Pentagon and New York’s World Trade Center in 2001.
Bair wants to include mortgage-servicing standards in risk- retention rules required by the Dodd-Frank Act, a position that puts her at odds with the mortgage industry and other agencies.
The Federal Housing Finance Agency said yesterday that it would draft servicing standards by 2012, a step that may diminish political pressure to include them in retention rules aimed at forcing lenders to keep a stake in debt they sell.
In a separate speech at the mortgage bankers’ conference, New York Banking Superintendent Richard H. Neiman said federal efforts on loan servicing must be coordinated with those of states that have already imposed tougher standards.
Coordination of servicing standards could be handled by the Consumer Financial Protection Bureau or the Financial Stability Oversight Council, both created by Dodd-Frank, he said.
“Regulators across jurisdictions need to be on the same page,” Neiman said. “With this kind of cooperation, we can ensure that there are no gaps, no opportunities for regulatory arbitrage, as well as ensure a level playing field across the industry.”
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