Tough Talk, Little Action On Problem Mortgage Servicers
WASHINGTON – Despite tough talk from regulators that they are cracking down on mortgage servicers that do not follow modification guidelines, the agencies have so far done little to nothing to punish firms.
The Treasury Department and the Federal Housing Administration have said servicers have failed to comply with conditions of some government programs, but have mostly just ordered them to do better next time, according to analysis by American Banker, an affiliate of Credit Union Journal.
While regulators argue that they are taking necessary steps to ensure compliance, observers said the agencies are unable and unwilling to act in most cases. “I don't think the tools have teeth,” said Tim Rood, managing director at Collingwood Group LLC. “That's the problem. …It's a lot of frowning and finger-pointing but not a lot of culpability.”
In an interview with American Banker, FHA Commissioner David Stevens defended his agency’s record, and said he will punish egregious offenders. “We’re in the process now of communicating with servicers who have violations and if it ultimately should come to pass that they cannot resolve them, there will be claims that can be assessed,” he said. “There’s absolute confidence from my perspective if we find these servicers have not followed compliance we will assess penalties and they will be sizable.”
But lawmakers are already crying for blood. At a House Financial Services housing subcommittee hearing on Nov. 18, Rep. Maxine Waters, D-Calif., blasted the Treasury for failing to punish servicer noncompliance with its Home Affordable Modification Program. “There have been no monetary penalties, from what I’m hearing from you, and no sanctions,” she said. The only thing the Treasury has done is “some work in instructing them that they have to change their practices and procedures.”