Lawmakers Concerned That Mortgage Settlement Could Mandate Mortgage Modifications
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Key Republicans on the House Financial Services Committee are concerned that the Obama administration’s proposed settlement with mortgage servicers could require the servicers to write down mortgage principles in certain cases.
The lawmakers noted in a letter to Treasury Secretary Tim Geithner that the settlement “not only legislates new standards and practices for the servicing industry, it also resuscitates programs and policies that have not worked in the past or that Congress has specifically rejected.’’
The House in December 2009 rejected an amendment that would have allowed bankruptcy judges to reset the terms of mortgages.
The proposed settlement between the state attorneys general and five biggest mortgage servicers would require some mortgage write downs.
The letter, signed by House Financial Services Committee Chairman Spencer Bachus (R-Ala.) and Capital Markets Subcommittee Chairman Scott Garrett (R-N.J.), and Committee Member Patrick McHenry (R-N.C.) states that the proposal raises “raises "significant concerns about its effect on the financial system," as well as concerns that the administration is attempting to force, via the settlement, changes to mortgage servicing that normally would be dealt with via legislation.’’
The lawmakers also express concern that monetary penalties from the servicers will be used to fund mortgage modification and they ask Geithner what is the legal basis for that.
Separately, Sen. Richard Shelby (R-Ala.), the tip Republican on the Senate Banking Committee said the proposed settlement represents a “shakedown of the banking industry.
The largest mortgage servicers are: Bank of America, Citigroup, GMAC/Ally, J.P. Morgan Chase, and Wells Fargo.