Attempts at Relief and Reform

Proposed Mortgage Servicing Conflict of Interest Elimination Act

Posted on Tuesday, April 6, 2010

A good idea, but expect idiocyncratic challanges. 2/3 of distressed mortgages are serviced by Bank of America, Wells Fargo, Chase, and Citibank, who also happen to own almost $500 million in second mortgages, creating a potential conflict in their ability to do what's best for the investors of the first mortgages they service. Some say this is also a reason the banks are not modifying first mortgages, but my feeling is thats more likely because its not consistant with traditional banking approach and attitude and because banks are concerned with modification re-defaults, moral hazard and the self-cure capability if left unmodified. The proposed Act prohibits mortgage servicers from owning debt secured by a home that secures a mortgage they service.

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