Senators Want Fed-State Coordination in Foreclosure Resolution
By: Carrie Bay
A dozen U.S. senators are pooling their influence to persuade federal regulators to work with state attorneys general and other federal agencies, including the U.S. Justice Department and HUD, as the various parties work to “fix the broken foreclosure process,” as the lawmakers put it.
In a letter to the head of the Office of the Comptroller of the Currency (OCC), the senators took notice of the move earlier this week by the OCC to give servicers an additional 30 days to file their action plans for conducting retrospective foreclosure reviews and implementing procedural changes outlined in regulators’ consent orders – a decision made at the behest of the Department of Justice.
The lawmakers also cited the OCC’s stated reasoning that the delay will allow for coordination with other agencies at both the state and federal level, and they underscored the fact that the consent orders handed down in April by the OCC, the Office of Thrift Supervision, and the Federal Reserve do not preclude the states’ efforts to hold servicers accountable for any wrongful foreclosures.
“The [OCC] has a pivotal role to play in utilizing the full scope of its authority to correct the weaknesses of servicers in terms of foreclosure governance and foreclosure
document preparation and in their ability to vigorously oversee and monitor third-party vendors, including foreclosure attorneys,” the senators wrote.
Signing on to the letter of persuasion sent to OCC chief John Walsh were: Sens. Jack Reed (D-Rhode Island), Richard Blumenthal (D-Connecticut), Banking Committee Chairman Tim Johnson (D-South Dakota), Judiciary Committee Chairman Patrick Leahy (D-Vermont), Sheldon Whitehouse (D-Rhode Island), Bob Menendez (D-New Jersey), Daniel Akaka (D-Hawaii), Chuck Schumer (D-New York), Sherrod Brown (D-Ohio), Dick Durbin (D-Illinois), Al Franken (D-Minnesota), and Jeff Merkley (D-Oregon).
Sen. Merkley, along with Republican Sen. Olympia Snowe (Maine) introduced legislation last month bearing the name “Regulation of Mortgage Servicing Act.”
The bill would make a number of the key reforms outlined in the regulatory consent orders law by requiring banks and mortgage servicers to create a single point-of-contact for borrowers, end the dual-track process of foreclosing while negotiating a modification, and provide an independent, third-party case review prior to commencing foreclosure.
Last Thursday, Merkley and Snowe offered up the bill as an amendment to the overarching economic development legislation (S. 782) currently making its way through Congress.
The coalition of 12 senators said in considering servicer action plans, the OCC should take into account the pending mortgage servicing regulation legislation, as well as the term sheet put forth by the states earlier this year.
“We urge you to consider the servicing standards proposed by the state attorneys, and to incorporate appropriate provisions of introduced legislation,” the senators wrote, “to improve the foreclosure process and help homeowners avoid foreclosure….[T]hese policies would be a better basis for a more fair and equitable system going forward.”
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