Posted on Monday, April 4, 2011
After reports that the timeline to iron out final details of the robo-signing settlement is “ambitious,” representatives from several major servicers, attorneys general, and some federal regulators are said to have a meeting planned for Wednesday, marking their first face-to-face discussion of terms.
According to the Wall Street Journal, officials from Bank of America, JP Morgan Chase, Wells Fargo, Citigroup, and GMAC will meet in Washington on Wednesday.
Perhaps in person meetings will help to diffuse some of the flames that the controversial proposal has ignited over the past few weeks since it became public.
Though recently released reports reveal that banks do practice principal write-downs in certain circumstances, many servicer officials spoke out against the mandatory principal write-downs that the settlement proposed.
The third quarter Mortgage Metrics Report by the Offices of the Comptroller of the Currency and of Thrift
Supervision revealed that servicers had performed principal reductions on 4.5 percent of total modifications completed through the third quarter. Principal reductions accounted for 10.2 percent of all HAMP modifications through the quarter.
But lawmakers have questioned the soundness of across the board write-downs, stressing that borrowers will have no incentive to pay their mortgages if they know banks will be forced to give them write-downs should they default.
Several attorneys general have also voiced their concerns about the proposal, with most of the concerns focusing on the principal write-downs.
And earlier this month four senators sent a letter to Iowa Attorney General Tom Miller asking, “Will forcing servicers to fund principal reductions for underwater loans they service affect the incentive of mortgagors to stay current on their loans?”
Even attempts to find other solutions to principal write-downs have been met with scorn from industry participants. After reports that FDIC chairman Sheila Bair suggested servicers provide borrowers with a cash-for-keys incentive to vacate their homes, Congressman Spencer Bachus released a statement deriding the idea.
“This proposal is simply outrageous and the worst bailout idea dreamed up so far,” he said. “Before the ‘cash for keys’ program was reported, the government was focused on spending money to help borrowers stay in their homes. Now they’re proposing to spend money to reward borrowers who strategically default.”
By: Joy Leopold, DS NEWS