Today is Tuesday, 20th February 2018

The Good, the Bad, and the Predictably Ugly

Check out a new RSLC President’s Perspective column on the agreement between the Obama administration, state attorneys general, and our nations’ largest mortgage lenders on foreclosure practices.

The long awaited announcement last week that the Obama Justice Department and state attorneys general have reached a settlement with five of the largest mortgage lenders over foreclosure practices contains a mixed bag of consumer benefits: a regrettable lack of connection between the alleged legal violations and remedy provided, coupled with the all too familiar grandstanding by the Democratic attorneys general. As Oklahoma Attorney General Scott Pruitt indicated when his state refused to join the settlement, this settlement went beyond the actual alleged legal violations. It contains generous terms for those who may have fallen victim to shoddy foreclosure practices, but equally generous benefits for those who were never subject to any such practices. While I suspect that many of his fellow Republican attorneys general agree with Pruitt’s assessment, it is completely understandable given the dire housing market that some conservative attorneys general would reluctantly sign on to the settlement. And so it is that this settlement, which even the Washington Post described as “rough justice”, is firmly located in the American political neighborhood at the intersection of “Principles Street” and “Pragmatism Avenue.”

The banks should not be faulted for being willing to settle. Like all businesses, the mortgage lenders need regulatory certainty and predictability.  In the wake of the 2008 financial crisis, Congress did not enact laws requiring “cram downs” on mortgages and other features included in this settlement. The American public was truly divided on wanting to help get the housing market back on its feet and not wanting to reward irresponsible behavior – after all, while there were lenders that were making ill-advised and irresponsible loans, there were also consumers on the other side willing to accept them. (Yes, yes, I realize that some consumers probably could not understand the complex terms of the mortgages, but who, making $35,000 a year, would not wonder why they were being lent enough money to buy a $500,000 home with no money down and a poor credit history?)

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