Mortgage Industry To Face Massive Changes Under Regulators' Plan; Homeowners, Investors Better Protected
Posted: 03/ 7/11 11:50 pm
Federal regulators and the top law enforcement officers in all fifty states are eyeing big changes to the dysfunctional home loan industry. If these officials have their way, borrowers who take out home loans and the investors who buy them will work closer together and find common ground to minimize foreclosures, while the middle men who are supposed to be performing that job will see their power diminished.
That's the takeaway from a 27-page proposed settlement agreement a coalition of all 50 state attorneys general and five federal agencies sent last week to the nation's five largest home loan firms. The document details how mortgage companies should treat borrowers who fall behind on their payments.
It's the opening salvo in what will be a months-long negotiation between the nation's largest banks and the officials who oversee them to settle state and federal claims that they abused borrowers and illegally foreclosed on homes.
"Laws were not being followed by the servicers," Illinois Attorney General Lisa Madigan said Monday. "That absolutely has to change."
Regulators, investors and consumer advocates have long complained of a crooked system in which the firms that are supposed to collect payments from borrowers and distribute the proceeds to investors, known as mortgage servicers, have worked to their own advantage rather than working for those they're supposed to represent -- investors.