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A group of non-profit housing industry leaders and advocates have written a letter to the top housing regulators in the U.S. asking them to investigate alleged pro-foreclosure campaigns on the part of Wall Street investors.
The letter, dated April 15, is addressed to Department of Treasury Secretary Jack Lew, Federal Housing Finance Agency Director Mel Watt, and Consumer Financial Protection Bureau Director Richard Cordray. Ten housing groups signed the letter, which asks the regulators to investigate the investors for allegedly attempting to push borrowers into foreclosure instead of steering them toward loss mitigation plans.
The letter points out that many borrowers in hardest hit areas are struggling with mortgage payments that far exceed the value of their home. Many borrowers have trouble making mortgage payments even when employed and are facing foreclosure and losing their homes, "halting their transmission of wealth generationally." The letter said that loan modifications (including those that offer principal reductions) are critical in helping families turn around an underwater mortgage situation and in stabilizing the communities in which those families reside.
"We are concerned by recent media reports stating that some of the largest hedge funds, mortgage bond traders, and insurance companies appear to be pushing servicers to foreclose on borrowers rather than offering them loan modifications and principal reductions," the letter said. "These are many of the same Wall Street investors that contributed to the mortgage crisis and have continued their unscrupulous practices."
The housing groups named Atlanta-based non-bank servicer Ocwen Financial Corporation as the leader in offering principal reduction mortgage loan modifications and in partnering with non-profit housing groups to ensure that borrowers know all their options and receive the resolutions they need to keep their homes.
Ocwen's work in offering loan modifications was detailed in a recent report by Morgan Stanley titled "Understanding Ocwen Servicing," which concluded that "Not only does Ocwen have a higher success rate on mortgages that went delinquent when it held the servicing rights, but it also seems to succeed at keeping borrowers in their homes when it takes on a delinquent or modified mortgage from another servicer," according to the letter. The letter also pointed out that that Ocwen was the first non-bank servicer to create a Consumer Advisory Council that demonstrated a commitment to obtaining mortgage resolutions that keep people in their homes. "Despite this work," the housing groups wrote, "there is still a lot to be done."
The letter accused certain Wall Street investors of initiating pro-foreclosure campaigns, therefore contradicting the 2012 National Mortgage Settlement negotiated by the U.S. Justice Department and Attorneys General in 49 states. The settlement calls for actively engage with community housing groups to develop foreclosure prevention programs, including principal loan modifications.
The letter closed with the housing groups requesting a meeting with regulators to discuss the issues presented.
"We urge you to seriously investigate and prevent these private interests from promoting policies which lead to unnecessary foreclosures," the letter said. "Access to principal reduction programs like Ocwen's Shared Appreciation Modification Program should be applauded; our communities need it. We ask you to encourage mortgage transfers to servicers who offer principal reduction as a solution to help struggling homeowners instead of other servicers who are more likely to pursue foreclosures."
