Preemptive Strike
Even before federal and state regulators strike a deal with the largest servicers on the penalty they must pay for multiple weaknesses in their processes, Rep. Maxine Waters has declared it insufficient.
Responding to published reports that the 14 servicers would pay a combined $20 billion penalty, Waters insisted the fine is too low.
"Particularly, I am concerned about the $20 billion settlement figure, spread across 14 servicers, that has been noted in various reports," Waters said in a press release.
"Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis," the California Democrat said, "we must remember that over 3 million homes have been lost to foreclosure since 2006 and some analysts expect an additional 11 million foreclosure filings in the near future. … This settlement is too small and will likely have one of two results: Either borrowers will receive insignificant principal reductions, or reductions will only be available to a small subset of troubled borrowers."
Waters may have reason to worry.
Contrary to the cited reports, sources insist no fine has been agreed to and that the final amount is likely to be significantly less than $20 billion.
The $20 billion figure was apparently floated in the press in an effort to pressure the banks and other regulators involved with the negotiations.
Waters said she is also worried, moreover, that the settlement is unlikely to include national mortgage servicing standards. Regulators are still drafting such rules but are mired in disagreements over how to proceed.
"I am also concerned about the fact that this settlement, as reported, contains no discussion of mortgage servicing standards going forward," Waters said.
"Though I was pleased that the administration briefly mentioned the need for servicing changes in their Fannie Mae and Freddie Mac reform proposal," she said, "we have yet to see the details of their plan for servicing reform. As I have reiterated for years, meaningful servicing standards are absolutely necessary to protect the millions of borrowers vulnerable to foreclosure."
Who'da Thunk It?
With the two political parties in Washington seemingly as divided as ever, it is hard to remember that Democrats and Republicans worked well together in the thick of the financial crisis.
So readers may be surprised by the foreword Rep. Barney Frank, D-Mass., has written to former Treasury Secretary Henry Paulson's book, "On the Brink," which details bipartisan cooperation.
David Wessel, The Wall Street Journal's economics editor, recently blogged highlights of Frank's foreword to the book.
The excerpts included explanations of why Frank, as chairman of the House Financial Services Committee, was able to cross the political divide to work with Paulson, an appointee of Republican President George W. Bush.
As quoted by Wessel, Frank wrote: "Two elements made it possible for Hank Paulson and me to work together despite partisan anger about our cooperation. … First, we trusted each other, admired each other's integrity and commitment to the public good and shared a similar and natural understanding of the crisis that faced us, and we were helped by the fact that we were both in power."
The second element promoting bipartisanship, Wessel quoted Frank as saying, was that, "to their great credit, President Bush, Speaker [Nancy] Pelosi and Senate Majority Leader [Harry] Reid gave us their full and indispensable backing."
Other highlights chosen by Wessel from the foreword included Frank's notion that partisanship is not always a bad thing.
"Partisanship is a legitimate concept that has been discredited by the excesses of too many of its practitioners," Frank wrote.
Fisher Joins Spahr
Keith R. Fisher has joined the financial regulatory group of the Ballard Spahr law firm.
He was formerly a regulatory consultant and taught law school courses on banking law and payment systems, among other experience.
Previously, Fisher practiced at the law firms of Mintz, Levin, Cohn, Glovsky and Popeo, as well as Hogan & Hartson.
Fisher's experience includes having been a special assistant attorney general in Maryland, where he represented the state's commission of financial regulation in filing a brief in the landmark preemption case Watters v. Wachovia Bank, which was heard by the Supreme Court in 2006.
