Wednesday, January 19, 2011

FDIC's Bair Wants Foreclosure Claims Commission

Looks like the Feds are finally taking the foreclosure crisis seriously! They want to form a commission like FEMA or something. Interesting read.

By Peter Barnes

One of the nation’s top banking regulators is proposing a BP-style commission to pay settlements to homeowners who have been hurt by the foreclosure mess.
“We need to provide remedies for borrowers harmed by past practices,” Sheila Bair, chairman of the Federal Deposit Insurance Corporation, said Wednesday. “A foreclosure claims commission, modeled on the BP or 9/11 claims commissions, could be set up and funded by servicers to address complaints of homeowners that have wrongly suffered foreclosure through servicer errors.”
Bair's proposal was among a number of recommendations she made in a speech to mortgage bankers in Washington. Her remarks centered on fixing mortgage servicing.
Consumer advocates have blamed mortgage servicing companies – mainly Bank of America (BAC: 14.72, -0.30, -2.03%), Wells Fargo (WFC: 31.90, -0.60, -1.85%) and other big banks – for moving too slowly to prevent foreclosures and pushing foreclosures improperly through sloppy legal paperwork. In her speech, she announced a number of proposed reforms to servicing home loans to help prevent foreclosures in the future; she hopes her agency will adopt them soon.
Bair proposed a “broad settlement” for homeowners that banks foreclosed on improperly.

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Such a settlement should prohibit foreclosure sales when a loan is in loss mitigation, except in specific situations where delay would disadvantage the investor, violate existing contracts, or reward a borrower acting in bad faith,” she said.
Bair acknowledged her proposal to establish a settlement commission would meet resistance from mortgage servicing companies "because it would impose much of the immediate financial cost of the major servicers themselves."
But she argued loan servicing companies would save money in the long run with lower foreclosure expenses.

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