A Foreclosure Agreement receives water from Down Home

foreclosure-watered There is new evidence that an arrangement $ 9.3 billion to help homeowners is less beneficial than it looks.

First, a little history. In 2011, the federal banking regulator, the Office of the Comptroller of the Currency, the signed consent decrees with some major U.S. banks, ordering them to review their mortgages and compensate borrowers where found errors. It was separated from the solution $ 25 Billion Mortgage National coordinated by 49 State Attorneys General. The federal agreement was supposed to the first time that borrowers would have an independent review of their mortgages.

Then, late last year, news leaked that the OCC was working on a new agreement with the banks billionaire. At the time the deal was announced in early January, it became clear that the new settlement failures wallpaper which is supposed to be independent foreclosure review process of the OCC was established in 2011. The OCC said the process was slow, expensive and was not producing much evidence that borrowers were damaged, although the Wall Street Journal reported last week that the error rates in some of the big banks exceeded 20 percent.

After trumpeting the agreement, the OCC late last week to find copies of the new agreements with 13 banks. Buried in the details (Article IV of the PDF documents linked at the bottom of the press release, to be exact) are ways of settling downstream of the number of banks that extending aid to borrowers. When he learned of a $ 9.3 billion, which logically would think that $ 9.3 billion in aid will be given to borrowers. But that’s not the case. Instead of giving banks credit only for the amount by which a mortgage cut, gives banks credit for the full value of the unpaid principal balance of the loan. As the New York Times explains:

“If a borrower bank cut mortgage debt $ 100,000 $ 10,000, the lender might reduce its commitment under the agreement for $ 100,000. Agreement In a previous foreclosure, banks received credit for only $ 10,000.”

Beyond the detail highlighted in the Times, the agreement is weakened in other ways: not set minimum or maximum rates banks provide assistance to borrowers. The National Mortgage Agreement, for example, forced banks to reduce the principal on troubled mortgages at least $ 10 billion-possibly one of the most beneficial changes to the borrower. But in the new settlement OCC, banks are not required to reduce any director. It also gives banks the credit based on the same unpaid principal balance for all the different types of aid, if they reduce the first mortgage balances, forgiving a second lien, modify the interest rate of a loan, or approve a short sale. Banks can also get credit (10 cents) for making what is known as tax deficiency, where banks waive the right to pursue debtors for the balance of a mortgage that they were unable to recover in a foreclosure.

The agreement also expands the category of loans that banks can use credit. The consent order focused on borrowers who had made outstanding or foreclosure on your primary residence in 2009 and 2010, but the new agreement, the banks can get credit for working with any borrower. That means that a bank could get credit for almost any prevention of foreclosure that makes any client at risk.

Ultimately, the solution away from borrowers and compensation made identifying banks may have made mistakes.


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