Disagreement over How to Punish Abusive Mortgage Companies, Distribute Funds
The mortgage crisis deeply affected thousands of American families. Financial abuses by the largest mortgage providers contributed substantially to widespread hardships. Now, regulators are struggling to come to an agreement on how banks should be punished, and who should benefit from any financial settlement.
A coalition of state attorney general offices and various federal agencies are nearing the conclusion of an extensive investigation into abusive mortgage practices. While there seems to be a consensus that wrongdoing has taken place in the nation’s biggest banks, there are substantial differences of opinion regarding what should be done about it. One possibility is pressing for a hefty settlement of $20 to $30 billion. The state attorneys general back this option, as does the Consumer Financial Protection Bureau, citing figures that indicate wrongful foreclosures and loan shortcuts saved the biggest mortgage firms at least $20 billion.
However, the Federal Reserve and the Office of the Comptroller of the Currency, among others, do not think such large penalties are appropriate. They contend that the $20 billion figure is incorrectly calculated, and that relatively few individuals were actually direct victims of improper foreclosures.
What to Do With the Money
Assuming a settlement is reached, there is still a discord over where it should go. Some regulators feel that only those directly victimized by the offending lenders should benefit from the settlement. The banks themselves especially find it unfair to reward mortgage holders who cannot show some error in their own case. But, if those homeowners who can pinpoint a specific instance of wrongdoing on the part of their mortgage provider are exclusively helped, only a tiny portion of Americans caught up in the foreclosure crisis will receive some relief.
Many officials instead favor a broader dispersion of the funds to help alleviate mortgage issues on a grand scale. The Obama administration believes that using the settlement proceeds to fund modification of delinquent mortgages and to assist families whose mortgage balance exceeds their home value could stabilize the housing market.
If you are wondering whether you may be affected by an eventual settlement, or if you have other mortgage or debt relief questions, contact an experienced bankruptcy attorney. Your attorney can assist you in exploring all you financial options and will help you take advantage of any available settlement funds or government programs.